Electricity tariff is set to increase by over 40 per cent in the coming days, a development which may eventually end all forms of energy subsidy in the country.
According to Guardian, the hike is expected to kick off from July 1, in spite of the government’s monthly subsidy of about N50 billion in the electricity sector owing to revenue shortfall.
Although the power sector players have been unable to meet the threshold of supplying at least 5,000 megawatts a year after signing contracts with Nigerian Electricity Regulatory Commission.
NERC’s current Service Based Tariff was benchmarked on an exchange rate of N441/$ and inflation of 16.97 per cent.
Going by the NERC’s orders, in 2015, the average tariff across distribution companies and classes of end-users was N25 kilowatt, in order of 198/2020, which came into effect on September 1, 2020. The average tariff went to N60 per kilowatt; in the Multi-Year Tariff Order for 2022, the average tariff was N64 across classes of customers.
The foreign exchange rate used in determining the 2015 tariff was N198.97/$, N383.80/$ was used in 2020, while N441.78/$ was used in 2022.
The inflation used in the 2015 MYTO was 8.3 per cent; 12 per cent was used in 2020 and 16.97 per cent in 2022. Currently, the inflation rate is 22.41 per cent and some experts have projected that it would hit 30 per cent by the end of June given the floating of the naira and subsidy removal on Premium Motor Spirit (petrol).
Coming as the metering gap remained at over seven million, gas prices, losses and actual generation capacity are other elements in determining the tariff.
