The opposition from organised labour and consumers may have compelled the Federal Government to halt the implementation of the new electricity tariff till the end of January. The Minister of Power, Mr. Saleh Mamman, who ordered the reversal of the policy, also directed the Nigerian Electricity Regulatory Commission (NERC) to enjoin all Electricity Distribution Companies (Discos) to revert to the tariffs of December 2020.
Curiously, days after the minister’s order, some of the Discos claimed they were yet to receive the directive to stop the new tariff. The Multi Year Tariff Order (MYTO) containing the latest tariff hike, Order NERC/225/2020, was signed by the new Chairman of the agency, Sanusi Garba. It supersedes the previous Order NERC/2028/2020. NERC had on January 5, 2021 announced an increase in tariff payable by customers of all classes.
The new hike which would have taken effect from January 1, came just two months after NERC effected a new tariff regime in November for each of the eleven Discos. But less than 24 hours later, the commission denied the increase in tariff by over 50 per cent. Rather, it blamed the N2 to N4 per kWhr adjustment in tariff on current 14.9 per cent inflation rate and movement in foreign exchange rate of N379/$1 as at December 29, 2020.
Other reasons NERC adduced for the hike were available generation capacity and the capital expenditure of the firms before the fresh tariff was raised. It also added that the new tariff will be effective till June 2021, while a cost reflective tariff would be activated from July to December 2021. When fully implemented through 2024, all electricity consumers in the country will witness increase in tariff of up to 120 per cent in an event of full cost reflective tariff.
Those under A, B and C categories will be more affected. Interestingly, the Minister of State for Labour and Employment, Festus Keyamo, has hinted that the NERC release on the tariff is not reflective of what was agreed upon by the Federal Government and organised labour technical committee.
In all, we believe that NERC’s reason is not enough to justify such an increase in tariff, especially at a time many Nigerians are looking up to the government for economic recovery and other palliatives to cushion the effects of the COVID-19 pandemic. While it is commendable that the Federal Government has listened to Nigerians and halted the implementation of the new tariff, we still believe that this is not the time to even contemplate any hike in electricity tariff. Apart from the economy being in recession, the purchasing power of consumers has been significantly eroded across all income classes, moreover, the poverty situation in the country has even worsened. The economy is contending with rising inflation, unemployment and fresh concerns about the second wave of COVID-19 pandemic. These factors are crucial, especially for a product of high social significance like electricity. The increase in electricity tariff at this period is ill-timed and unacceptable. It could lead to civil unrest with unimaginable consequences. It is commendable that organised labour and the masses have resisted the new hike in electricity tariff. It is also good that the government has dropped the price hike. We also think that the regulatory agency should not be oblivious of the plight of Nigerians who are groaning under excruciating economic conditions. It is disheartening that NERC has remained defiant and uncommitted to protecting electricity consumers. Time and time again, NERC has failed to deliver on service levels under the service-based tariff regime. The present move to hike the tariff was unilateral because the commission did not consult the relevant stakeholders as stipulated in the Electric Power Sector Reform Act and the nation’s tariff methodology.
We are aware that the federal and state governments are facing weak revenue generation challenges, they should not use it as an excuse to overtax the masses. The present plan to raise electricity tariff is one of such plans. Government should stop asking the masses, who are already down, to tighten their belts. Rather, government should find creative ways to generate more revenues. Between September and December 2020, government increased electricity tariff twice. On November 1, 2020, Discos commenced the implementation of the revised electricity tariff that was jointly agreed upon by organised labour and the federal government.
We call for a transparent approach to electricity pricing to avoid a possible pushback from the consumers. The economy cannot withstand another round of avoidable protests which may emanate from unconscionable hike in electricity tariff. While we support a cost-reflective tariff regime for electricity, there is need for a transition to the new pricing regime that would be gradual to minimise shock and resistance by consumers. No doubt, government and Discos may have some points for the increase in tariff. However, it is imperative for the government and the NERC/Discos to also consider the social effects of such action. It bears repeating that a lot of Nigerians are already weighed down by rising prices of goods and weak purchasing power. They should not be burdened again with high electricity tariff. There is need for more consultations and negotiations on the best ways to meet the power needs of Nigerians instead of the frequent resort to tariff hike.