BY MICHAEL EBOH
Despite the recent increase in electricity tariff by the Nigerian Electricity Regulatory Commission, NERC, economic analysts insist that Nigeria still has one of the lowest electricity tariffs in Africa.
In an email response to Vanguard on the recent hike in tariff, Mr. Oludare Oduale, an analyst with Nextier Capital Limited, maintained that countries like Liberia, Bukina Faso, Senegal, Mali, among others, have higher electricity tariffs than Nigeria.
He said the anger over the hike stems from a lack of understanding of the way electricity tariffs are calculated.
According to him, the public frustration that has followed the announcement of the new tariff is driven more by the fact that there is shortage of electricity supply rather than the quantum of the increase in tariff.
He said, “Most Nigerians understand that there could be tariff increases in the early stages of the privatised industry and that the prices will correct downwards as the sector increases its capacity.
“The frustration seems to have been exacerbated by the botched communication around the power sector privatisation that made it seem as if there will be instant increase in power availability as soon as the new owners of the privatised power companies signed the dotted lines of the sales agreement.”
Oduale further argued that stable power supply cannot be separated from tariff review, noting that without a viable electricity industry, it will be difficult, if not impossible, to attract the quantum of required investment.
He explained that a cost-reflective tariff is what is pivotal to the viability of the industry, adding that tariff reviews are conducted to ensure customers do not pay more than they should and that the industry remains viable and attractive for investments.
Continuing, he said, “The increase in electricity tariff, that took effect from June 1, 2014, is infuriating to the consumers, media commentators, and labour unions in Nigeria. The fact is that NERC is statutorily expected to review the fundamental variables that drive the electricity tariff calculations twice a year (June 01 and December 01) and any significant change in the variables should be reflected in the new tariffs.
“The tariff reviews are conducted to ensure customers do not pay more than they should and that the industry remains viable and attractive for investments. The tariff reviews are driven by economic variables including inflation rate, exchange rate, gas price, and available generation capacity. As is obvious, these variables are not static. Any plus or minus five per cent change in the aggregate variables is a trigger for a tariff review.”
Also speaking, Mr. Okwy Okeke, Managing Director, Continental Alarms, said the 8.3 per cent increase is not much, considering the rate of inflation and the fact that it has been long since such review was carried out.
He said, “The new rate may not even factor into the near constant N30,000 per month I pay for my office at Dolphin. My power bill in the United States fluctuates between $40 and $180 per month, depending on the season.
“Note that rates are not fixed as they are in Nigeria. Power rate in the early morning rush period is not same by late morning, among others.Maybe that is something we can throw into the conversation to help load management/shedding.
“Tariff increase will not be as high as individual power generation, as is presently the case. Then few, if any, will be happy to pay more for same.
“The 8.3 per cent increase? What is inflation rate this year, and when was the last rate review? It is important we bring up the quality of our public conversation beyond the mundane.
“The struggle is how to make a people raised under a pseudo-socialist country come to terms that we are now a capitalist temple.”