Consumer rights groups and manufacturers have criticized the timing of the latest electricity tariffs hike as approved by the Nigeria Electricity Regulatory Agency (NERC).
The groups, the Energy Consumer Rights and Responsibilities Initiative (ECRRI) and All Electricity Consumers Protection Forum (AECPF), decried the increment in interviews with News Agency of Nigeria (NAN).
National Coordinator of AECPF Adeola Samuel-Ilori,, said the adjustment was illegal, unjust and unfair to electricity consumers. He added that the minor adjustment which is coming after NERC increased tariffs on Sept. 1, 2020, violates the provisions of Sections 32, 63 and 72 of the Electric Power Sector Reform Act (EPSRA), 2005.
He said the Act provides that any minor tariff adjustment should be done after a period of six months, stressing that the review was an illegality. “Our position is that we are examining the situation because it is a legal issue and we may need to go to court for interpretation if they go ahead with the adjustment,” Samuel-Ilori said.
National President of ECRRI, Also, Sural Fadairo, said the minor adjustment was “not necessary at this point in time. NERC has a duty to protect electricity consumers from exploitation but what we are seeing now is clearly the opposite, with adjustment in tariffs within a very short period.
“We are calling on the National Assembly to urgently intervene and halt this minor review for now,” Fadairo said.
The Manufacturers Association of Nigeria (MAN), Edo/Delta branch, has described the increase in electricity tariff by the Nigerian Electricity Regulatory Commission (NERC) as `ill-timed’ due to the economic recession. Okwara Udensi, Chairman of the branch, told the News Agency of Nigeria in Benin yesterday that many businesses were still facing untold hardship caused by the COVID-19 pandemic and EndSARS violence.
He said the manufacturing sector is faced with high cost of production warning that any further increase in electricity tariff would worsen production and purchasing power of consumers. “The economy is in a bad shape, we are in recession, so an increase in electricity tariff will translate to an increase in the cost of goods and services.
“Besides, the purchasing power of the people is low and people will not buy goods produced at very high cost and this will lead to most SMEs becoming moribund,” he said. Felix Ofolue, Head Corporate Communications, Ikeja Electric (IE) said: “Yes. It is a minor review that has been on the cards since the Service Based Tariff (SBT) was introduced on Sept 1 and reviewed on Nov 1, 2020. The MYTO order which extends till 2025 is on NERC website. It cuts across Nigeria”, he said
The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) President Ambassador Ayo Olukanni said the hike would rub off on other sectors of the economy.
He said: “I do expect another review of Electricity Tariffs given the implementation of the MYTO and this raises concerns with regards to the inflationary effects of the cost of power on every other sector of the economy.
“In the current reality of COVID-19 and its impact on the Nigerian economy, currently manifesting as economic recession, a continuous increase in the cost of production (which would be the result of these periodical increases) will impede the growth of the real sector.
“Business concerns will attempt to pass-on some of these costs to consumers by increasing their prices, demand would drop, and the vicious-cycle will continue.
“Our counsel to the government remains the implementation of policies (even if it is in the short term) that increase the productive capacity of the real sector, as well as the disposable income of the general populace, as this is the time-tested approach to exiting a recession.”
However, the Association of Nigeria Energy Distributors (ANED), said the review that took effect from 1st January, 2021, is not yet cost-reflective.
ANED Executive Director, Research and Advocacy, Chief Sunday Oduntan, said the review was “not totally cost-reflective, what they are doing now is moving gradually towards cost reflectivity.
He said the Nigerian Electricity Regulatory Commission (NERC) does not want the cost-reflective tariff to shock the customers and urged Nigerians to be patient for the service providers to improve on service delivery.
He said: “They don’t want it to be a shock. They don’t want to give Nigerians the actual cost of production at a go. So they are doing it gradually, six monthly.
He said the tariff was computed based on three components: inflation, exchange rate and capital expenditure (CAPEX) of the DisCos, GenCos and Transmission company of Nigeria (TCN). It is based on exchange rate because 90 per cent of the equipment in the entire sector are imported.
He said of the total collections from the customers, what gets to the DisCos is less than 25 per cent. “Foreign exchange is very important. You cannot calculate tariff in any country where you import your materials without considering the cost of foreign exchange. Three things that are important that we considered there: the rate of inflation, rate of foreign exchange and the capital expenditure by the operators: the DisCos; the GenCos; the Transition Company. “Those are the chain that determine what the tariff should be.
You should also know that the DisCos own less than 25 per cent of that tariff. What you pay for electricity goes through the value chain of which the DisCos retain less than 25 per cent.” Oduntan said with the development current, the DisCos can now distribute more energy if more power is produced and transmitted to them, stressing that the “tariff has not been increased by 50 per cent.”