Nigerian govt confirms jumbo electricity price increase

The Nigerian government has approved an increase in electricity tariffs, saying a more-than-threefold increase will affect customers in urban areas.

The Nigerian Electricity Regulatory Commission (NERC) said in a statement that private distribution companies are allowed to charge N225 per a kilowatt hour, more than three times the previous rate.

“The commission has approved a rate review of 225 naira per killowatt hour from a maximum of 68 naira per kilowatt hour … for just under 15% of the customer population in the Nigerian electricity supply industry,” the vice chairman of the NERC, Musiliu Oseni, said.

He said the increase affects customers under the Band A classification, which covers customers that enjoy 20 hours of electricity supply daily.

Mr Oseni said at a press conference that customers in Band A represent a 15 per cent of the 12 million electricity customers in the country.

The price increase takes effect immediately, he said.

Consumer Impact

The announcement confirms earlier reporting that an increase was coming within weeks.

The policy promptly adds to a devastating cost-of-living crisis millions are facing currently following the devaluation of the naira and the scrapping of petrol subsidy.

What the government thinks

• • • The government hopes this price hike will lessen its subsidy burden. Currently, the government spends around N3.3 trillion annually to subsidize electricity costs.
    • The government also aims to incentivize investment in the electricity sector, which has been hampered by a lack of funds.
    • Eliminating price distortions, the government believes, will encourage more efficient operation within the power sector. Despite past privatization efforts, significant challenges persist.

Troubled sector

Nigeria faces persistent power shortages more than a decade after the state power company was broken into 11 distribution companies and six generation firms and sold to private investors.

Despite the privatisation, the government through the Nigeria Electricity Regulatory Commission continues to set prices, and pays the difference as subsidy to companies in the sector.

But private entities have long complained that the arrangement, in which the government often delays in paying the subsidy, limits them from charging a cost-reflective price to improve their finances, and deliver quality service.