Electricity tariff hike looms as FG plans to end subsidy

Power consumers have opposed plans by the Federal Government to raise electricity tariffs by over 66 per cent, from N116.18 to N193.63 per kilowatt-hour.

The Special Adviser to President Bola Tinubu on Energy, Olu Verheijen, recently disclosed that the current power tariffs would rise by about two-thirds.

Verheijen said Nigeria’s power prices need to rise by about two-thirds for many customers in order to reflect the cost of supplying it, adding that an increase should be expected within months.

In an interview with newsmen during the Mission 300 Energy Summit in Dar es Salaam, Tanzania, Verheijen disclosed that higher electricity tariffs, which need to be balanced by subsidies for less-affluent consumers, are required to fund the maintenance necessary to improve reliability and to attract private investors into power generation and transmission.

“Nigeria’s power prices need to rise by about two-thirds for many customers to reflect the cost of supplying it.

“Higher electricity tariffs, which need to be balanced by subsidies for less-affluent consumers, are required to fund the maintenance needed to improve reliability and to attract private investors into power generation and transmission,” Bloomberg quoted Verheijen as having said.

“One of the key challenges we’re looking to resolve over the next few months is transitioning to a cost-efficient but cost-reflective tariff,” Verheijen said

She added that this is needed “so the sector generates revenue required to attract private capital, while also protecting the poor and vulnerable.”

Nigeria’s power industry needs significant investment to achieve its development aims, Verheijen said. Of the country’s 14 gigawatts of installed power, only 8GW can be transmitted around the country and just 4-5GW can be directly delivered to homes and businesses, she said.

A senior official of the Nigerian Electricity Regulatory Commission told one of our correspondents that all electricity customers, except those already on Band A, should be prepared for a cost-reflective tariff.

The official, who did not want to be mentioned for not being authorised to speak with the press, said the subsidy is becoming a burden to the government and the failure to pay the same to the Discos is affecting liquidity.

“A cost-reflective tariff is coming sooner or later. The government can no longer shoulder the responsibility of paying subsidies. It is no longer sustainable. So, all customers should get set for new tariffs,” the official stated.

Recently the Minister of Power, Adebayo Adelabu, also hinted that the Discos were calling for a cost-reflective tariff.

Also, electricity distribution companies complained that the Federal Government has not been fulfilling its promise to pay the cost of subsidising the electricity consumed by customers on Band B to E.

The Executive Director of Research and Advocacy of the Association of Nigerian Electricity Distributors, Sunday Oduntan, said only customers on Band A pay the right cost of electricity consumed, while the government subsidises about 67 per cent of what other customers should pay.

He said the government promised to pay for the shortfalls but it has continued to default.

“Today, only people in Band A pay the true cost of electricity. If you are in Band B, C, D, or E, the government is subsidising your electricity consumption by as much as 67 per cent, which means you are not even paying up to half of what you should be paying, and the so-called subsidy is not being paid by the government. It is now a kind of shortfall because it continues to pile up.

“What has happened to Nigeria over the years is that the government keeps asking that electricity should be sold far below the landing cost, and the government keeps on promising, ‘Don’t worry, we’ll give you the shortfall’, that is the subsidy. But it has never been done, that is the problem,” Oduntan lamented.

Our correspondent reports that according to a recent report by the Nigerian Electricity Regulatory Commission, the average allowed tariff for customers still enjoying government subsidies is said to be N116.18 per kilowatt-hour.

Two-thirds of N116.18 is calculated to be N77.45. This means a customer is expected to pay about N193.63 for one kilowatt-hour of electricity consumed.

The tariff is about N16 below the N209 payable by customers on Band A, who must get a minimum of 20 hours of electricity per day.

In the case of customers in Band B to E, the power distribution companies do not accord them any priority as these customers only get power supply whenever the Discos wish to make it available.

Our correspondent recalls that the NERC introduced a Service-Based Tariff in 2020.

The Service-Based Tariff is a scheme introduced to improve service delivery to end-user customers and ensure that electricity tariffs paid by end-user customers reflect the services delivered by the distribution companies based on the number of hours of electricity supply per day.

Under the SBT, consumers are classified into Bands A to E.

Band A customers get at least 20 hours of electricity; Band B, a minimum of 16 hours of power supply; Band C, 12 hours; Band D, eight hours; and Band E, four hours.

However, many Nigerians in Band B to E have complained of power outages that last for days, months, or even years in some locations.

Since April 2024, when the cost-reflective tariff was implemented in areas under Band A feeders, the Discos have prioritised these customers with stable power supplies to the detriment of other consumers who now endure long hours of darkness.

It could not be immediately confirmed whether the government has plans to ensure strict adherence to Service-Based Tariff hours of supply for all bands with the planned tariff increase, but available power generation which is below 5,000 megawatts coupled with the incessant grid collapses has shown that there is no enough power generation to satisfy consumers.

There are fears that customers on the estimated billing system may have to pay more for services not enjoyed.

Consumers kick

The Coordinator of the Electricity Consumers Protection Forum, Adeola Samuel-Ilori, wondered why the government would contemplate tariff hikes without metering customers.

According to Samuel-Ilori, the plan to increase tariffs has already been in place since January 2024.

He said the major tariff increase was agreed to be effective in January 2025, but the Band A aspect was singled out for a further increase in April 2024, saying the forum proceeded to court to challenge the Band A tariff increase.

“If they chose to implement the tariff increase now, it’s not new and not surprising to some of us in the power sector as critical stakeholders. What we are saying is that, as they implement the tariff adjustment according to the law, they should also implement the provisions of the law in Section 114 of the Electricity Act which compels Discos to provide meters to customers at no price to them and Section 13 of Consumers Protection Regulations 2023.

“And if the meter is not available, the implementation of the capping method released monthly by NERC to Discos as the only unit an unmetered customer should be billed must be enforced,” he stressed.

Samuel-Ilori decried the failure of the Discos to meter their customers despite being billed for the same.

“There is a meter acquisition fund which was derived from our unit price on every purchase of electricity tariffs by customers since 2019. That one ought to serve as a cushion for customers to get meters freely apart from the provisions of the law to provide meters for customers.

“So it’s a question of double jeopardy for consumers in Nigeria. They deducted it from our tariff template and still ask customers to buy the same meter from the map providers’ companies approved. Hence, if they are increasing tariffs at every Atakumosa market day, the rights of the consumers to have what’s stipulated in law operations should not be denied to them,” he declared.

He stressed that the meters being distributed by the government were not procured by the government but through the meter acquisition funds deducted as a result of the tariff paid for power supply.

Samuel-Ilori disclosed that the consumer protection forum has plans to get a court order directing the DisCos to meter their customers within a certain period.

“We are working to get an order of mandamus against NERC to implement Section 114 of the Electricity Act, 2023 as amended, which says inter alia that the NERC shall give time to Discos to make meters available for customers or their licences shall be revoked.

“Also, Section 13 of the Consumers Protection Regulations 2023 says that the discos shall be responsible for the provision of meters and meter accessories to customers free,” he declared.

Speaking, the Executive Director of the Consumer Protection Advocacy Centre, Princewill Okorie, bemoaned the plan to hike tariffs, saying it was an attempt to impoverish Nigerians already facing economic hardships.

Okorie queried what the Federal Competition and Consumer Protection Commission is doing to protect consumers.

According to him, the Federal Government is making consumers pay more for services not rendered to them.

“Why is the Federal Government making life difficult for the consumers? What is the Consumer Protection Commission doing to ensure Nigerians are not exploited? Everything is hard yet consumers are made to pay more for electricity that is not available. It started with Band A, and now they want to extend it to other consumers. Many people can no longer pay for energy; businesses are shutting down yet supporters of the government said we are on the right path.

“This increase is uncalled for, especially when many consumers are not metered. Consumers are the ones paying for meters; the DisCos are only making money without injecting anything into the sector. This will be unfair to the consumers who are still struggling to make ends meet. The government knows what to do before thinking of any tariff increase. The FCCPC should try and protect the consumers,” he said.

Reacting, the Special Adviser to the Minister of Power on Media Relations, Bolaji Tunji, hesitated to directly confirm the planned increase but acknowledged that it is inevitable.

“No doubt, cost-reflectiveness is desirable, however, the government is not planning a tariff increase for now. It cannot be ruled out in the future. Presently, Our focus is to strengthen the grid and gradually migrate the people to Band A.”

However, the founder of PowerUp Nigeria, Tayo Adegbenle, opined that the tariff increase would aid the sector’s growth.

Adegbenle said Nigeria had been sacrificing quality of service and potential investments in the power sector on the altar of subsidies.

“Our subsidy regime is not sustainable and we need fresh ideas and approaches to attract investment and tariff setting. Fortunately, you can see the Federal Government is following my recommendations,” he stated.

The PUNCH reports that Nigeria, with over 200 million population is still struggling with 4,500 megawatts of electricity.

Efforts made in 2024 to ramp up power to 6,000MW were unsuccessful due to vandalism and incessant grid collapses.

At the moment, over 250 companies and institutions have dumped the national grid to generate their own electricity.

Similarly, about seven million customers are not metered despite the government’s efforts and promises to close the metering gap.