Electricity tariff is set to increase by over 40 percent in the coming days, a development which may eventually end all forms of energy subsidy in the country, the Guardian reveals.
With a monthly subsidy of about N50 billion still in the electricity sector owing to revenue shortfall, the tariff hike due from July 1, may be another acid test for the President Bola Ahmed Tinubu administration’s market reform.
The administration has already removed subsidies on Premium Motor Spirit (PMS) and floated the naira, decisions that have complicated the price-setting of the Nigerian Electricity Regulatory Commission (NERC) 2022 Multi-Year Tariff Order (MYTO).
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 NERC, NERC’s current Service Based Tariff (SBT) was benchmarked on an exchange rate of N441/$ and inflation of 16.97 percent.
Coming as the metering gap remained at over seven million, gas prices, losses and actual generation capacity are other elements in determining the tariff.
Most stakeholders told The Guardian that while the increase is unavoidable due to the changes in the parameters, households and small businesses, which should power the economy, may head for serious problems with energy costs alone rising to over 70 percent as purchasing power remains a challenge in the face of unemployment and poverty.