Tunde Okunlola
Nigeria’s power industry is a vital part of the nation’s economy, but it has faced numerous difficulties which had resulted in insufficient supply of electricity. Nigeria has the largest economy in Africa, but its infrastructure for the production, transmission, and distribution of electricity has not been able to keep up with the needs of the country’s expanding industrial base and population.
The nation’s power generation varies between 3,500MW and 5,000MW, possessing 11,165.4 megawatt generating capacity. Considering the population of the nation, which exceeds 200 million, the amount of electricity generated is rather low.
The minister for Power Adebayo Adelabu had hinted that the ineffectiveness in the power sector can be attributed to lack of funding and the tariff has to be cost reflective in other to get funding. Hence, there is a need for upward review of electricity tariffs.
The era of new power tariff in Nigeria began on the 3rd of April, 2024 when the Nigerian Electricity Regulatory Commission (NERC) announced the upward review of Band A consumers from 65 naira to 225 naira per kilowatt representing a 300 percent increase.
The categorization is based according to the number of hours of power distributed where Band A are consumers who enjoy the minimum of 20 hours power, Band B minimum of 16hours, Band C minimum of 12 hours and Band D minimum of 8 hours.
New Electricity tariff(Source: the Cableng)
The tariff review’s increasing trajectory has impacted both small and large enterprises. Manufacturers have been severely impacted by increases in electricity costs, which have also made inflation worse and presented difficulties for small and medium-sized businesses. Due to the increasing manufacturing costs as a result, manufacturers will raise prices on customers, driving up the cost of goods and services.
While some businesses, like Flour Mills of Nigeria’s Golden Penny Power, moved to generate their own electricity, many others integrated alternative power sources to supplement the existing power sources. Small scale businesses, which already have limited resources, find it difficult to pay these extra expenses, which could lower their competitiveness or even cause them to close.
Business owners now spend what they formally spend for a month on power in a week. This has resulted to a serious change in production and spending pattern. Many businesses have had to reduce their period of operation, Barbers now use rechargeable clippers which are energy saving, Tailors reduce the use of electronic sewing machine.
Many households now ration the use of electricity. Majority now use electricity at night only to help them manage cost.
Seun Dada (Photo Credit: Tunde Okunlola)
Metal fabricator Seun Dada stated that he eventually had to rely on his generator instead of a power source due to the rise because his equipment was old and energy-hungry at the time. Before he could re-join, he needed to save money to purchase the new generation of energy-saving technology.
Idowu Moses *Ohoto Credit: Tunde Okunlola)
Idowu Moses, the owner of a barbershop, stated that his business has changed as a result of the increase in electricity prices. Unlike before the increase, when he would turn on the air conditioning at any time, he no longer does so unless the weather is extremely hot. Positively, he stated that it has taught him how to manage power and that there has been a steady supply of power since the rate rise, which has significantly reduced his need to buy gasoline popularly known as “petrol”
In as much as the masses have acknowledged the improvement in the supply of electricity since the tariff increase, they still have reservations on the pricing. There’s call for the government review of the tariff from Nigeria Labor Congress, Business experts and Civil societies.
What can the Government do?
Statements from the Nigeria Electricity Regulatory Commission (NERC) connotes that the pricing of electricity is determined by the value of Naira to dollar as gas for powering the Thermal plants which make up 53.3 % of the country’s power generation is purchased in dollar to Naira rate. Hence for there to be affordable electricity tariff, the government must make sure value of naira goes up. And this can only be achieved when there’s more productivity than consumption in the country.
Reasonably priced power rates would lower living expenses, improve access to services like healthcare, education, and technology, and improve the general well-being of the populace. Furthermore, since reliable and reasonably priced power is a major consideration for investors, it would draw foreign direct investment. All things considered, lowering the cost of power would spur industrialization, generate employment, lessen poverty, and hasten Nigeria’s economic growth.
