Economists have expressed concerns over the hike in electricity tariff by the Nigerian Electricity Regulatory Commission, NERC, saying the policy will worsen the poverty rate in the country.

This is just as the Trade Union Congress of Nigeria, TUC also described the electricity tariff hike as a recipe for unrest in the country.

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The Deputy President of the Trade Union Congress of Nigeria, TUC, Dr Tommy Okoh, said the hike is unacceptable, urging the government to allow the poor to breathe.

An energy expert, who spoke on condition of anonymity said, “The most immediate impact on consumers would be higher electricity bills. With increased tariffs, consumers would have to pay more for the same amount of electricity usage. This could strain household budgets, especially for low and middle-income families.

“Increased electricity bills would leave consumers with less disposable income to spend on other goods and services. This could lead to reduced spending on non-essential items, impacting various sectors of the economy.

“Facing higher bills, consumers may opt to reduce their electricity consumption to manage costs. This could mean cutting back on non-essential appliances or adopting more energy-efficient practices. While this could lower electricity bills, it may also impact comfort and productivity levels in households.

“The burden of increased electricity tariffs may disproportionately affect low-income households, exacerbating existing social and economic disparities. It could push more people into poverty or deepen the financial struggles of vulnerable populations.

Similarly, the Chief Executive officer, Centre for the Promotion of Private Enterprise, CPPE, Dr. Muda Yusuf, said: “The power sector issue has become a major conundrum in the economy. There is a major funding and liquidity crisis which is posing significant risk to investments in the electricity value chain.

“Costs across the chain have been rising as a result of the multiple macroeconomic headwinds.

Meanwhile, the system is not generating the desired liquidity to match the escalating costs. Tariff review is thus inevitable. And there is a limit to the subsidy burden the government can continue to bear.

“But it is noteworthy that the increase is not across the board as only 15% of electricity consumers are affected. And this is targeting the segment with the highest ability to pay. This reflects some attributes of equity in pricing.

“But some fundamental issues need to be addressed in the electricity value chain. There are issues of technical and commercial losses which are yet to be addressed. These are inefficiencies costs that consumers are compelled or expected to pay for as part of the cost recovery argument.

“And these costs are in billions of naira. There is also the exploitative practice of estimated billing. Millions of electricity consumers are yet to be metered.

“There is the problem of over centralization of the power supply through the national grid model. There are capacity issues with some of the electricity Distribution Companies, contributing to the lapses in electricity delivery outcomes.”

Reacting as well, Communications & Economy expert, Clifford Egbomeade, said, “The recent decision by the government to increase electricity tariffs by approximately 230% carries significant economic implications for both businesses and consumers alike. One immediate effect is the rise in operating costs for businesses, particularly those with high energy consumption, such as manufacturing industries. 

“This could lead to reduced profitability and potential layoffs as businesses seek to offset the increased expenses. Moreover, higher production costs may ultimately be passed on to consumers in the form of higher prices for goods and services, thereby impacting consumer purchasing power and potentially contributing to inflationary pressures in the economy.”