Why Nigeria Cannot Increase Electricity Tariff Now
The Nigerian government has said it can not approve a tariff increase due to the country’s current economic woes. This is despite calls by industry stakeholders for a cost-reflective tariff.
The Multi-Year Tariff Order (MYTO) methodology gives room for the biannual review of tariffs with consideration to inflation, interest rates, and foreign exchange. In contrast, major reviews are carried out every 5 years when all of the inputs are reviewed with stakeholders.
In July 2023, the Electricity Distribution Companies (DisCos) attempted to increase tariffs after filing an application for rate review with the Nigerian Electricity Regulatory Commission (NERC).
But the Minister of Power, Chief Adebayo Adelabu at an interactive session with journalists in Abuja on Wednesday said that although the government ought to have increased tariffs which is a major cause of financial challenges, this was shelved.
According to him, if the review is approved, Nigerians will pay double of the current rate.
“I never said it is not time to charge a cost-reflective tariff, I said cost-reflective tariff ought to have been implemented months ago because it is the source of liquidity to the system, but for political reasons and empathy, we cannot impose additional burden on Nigerians.
It is not politically expedient to now implement a tariff that is more like doubling the existing tariff, but for political expediency, I don’t think it is something that we can do so immediately,” he said.
The Minister stressed that before it approves the tariff increase,” there will be lots of sensitization and communication with the general public and we must ensure that there is an assured increment in power supply.”
Meanwhile, Adelabu stated that the 700 megawatts Zungeru hydro power plant will commence operation by December end.
He confirmed the completion of the project. He said,” The only thing left is just to complete the rest of the evacuation infrastructure so that the entire 700 megawatts being generated can be evacuated into the transmission as it is today, the infrastructure we have there can only generate 300 megawatts.”