In a move bound to affect a segment of electricity consumers, the Nigerian Electricity Regulatory Commission (NERC), acting on behalf of the federal government, has given the green light for an increase in electricity rates for consumers categorized under Band A.
This development, disclosed in a press statement by Musliu Oseni, the Vice Chairman of NERC, marks a significant adjustment in electricity tariffs, which the Minister of Power, Chief Adebayo Adelabu, has long advocated.
Oseni highlighted that the tariff hike would see consumers under Band A paying N225 per kilowatt-hour, a substantial increase from the existing rate of N66 per kilowatt-hour. Band A consumers, comprising 15% of the nation’s 12 million electricity consumers, are primarily urban consumers.
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The decision to revise the tariffs stems from the failure to meet the required electricity supply hours, leading to the reclassification of some Band A customers to Band B. Oseni explained that upon reviewing the performance of various feeders, the Commission has reduced the number of Band A feeders from 800 to under 500, with only 17% now qualifying as Band A feeders.
In response to concerns about the impact of the tariff hike, Oseni clarified that the revised rates would only affect a fraction of the customer population. The April supplementary order issued by the Commission ensures that less than 15% of customers in the Nigerian Electricity Supply Industry (NESI) will experience the rate increase. Oseni disclosed that the adjustment would not affect customers in other tariff bands.
He said: “We currently have 800 feeders that are categorized as Band A, but upon reviewing those feeders’ performance, the Commission has now reduced it to under 500. This means that 17% now qualify as Band A feeders. These feeders only service 15% of total electricity customers connected to the feeders.
“The commission has issued an order which is titled April supplementary order taking effect from today.
“The commission now reviewed further the application by the distribution companies and has decided that only the 17% feeders and less than 15% customers will be affected by any rate increase that the commission will ever approve for the distribution company.
“The order takes effect from today and in that order the commission has approved a rate review of N225 per killowatt hour for just under 15% of the customer population in NESI. That means that less than 15% of the customers will be affected.”
Backstory and Context
Earlier reports indicated that the federal government was poised to implement a substantial increase in electricity tariffs, aiming to attract investment into the sector. Sources familiar with the situation revealed to Bloomberg, plans to raise tariffs for urban consumers to N200 per kilowatt-hour, up from N68, with urban centers accounting for 15% of the population but consuming approximately 40% of the nation’s power.
Bayo Onanuga, the Special Adviser to the President on Information and Strategy, confirmed that NERC would announce a price increase soon, emphasizing that the government would refrain from commenting until the regulator’s decision. Onanuga said there are ongoing discussions between the regulator, distribution companies, and generating companies in determining tariff adjustments.
The review is believed to have stemmed from the need to minimize the burden of electricity subsidies being borne by the federal government for long. In February, the Minister of Power declared that Nigeria should transition to a full cost-reflective tariff regime to address the challenges plaguing the country’s electricity sector.
He disclosed that the country is currently indebted to the tune of N1.3tn to generating companies (GenCos) and $1.3bn owed gas companies and that it will require an additional N2 trillion to subsidize power for Nigerians, whereas only N450 billion was budgeted for that in 2024.
While Nigerians and the Senate rejected the proposed tariff due to multi-faceted challenges – including epileptic electricity supply, Adebayo appears to have streamlined the framework to protect consumers.
However, the recent tariff adjustment has sparked new concerns, particularly regarding its impact on consumers. With the tariff revision affecting only 15% of consumers, there is a growing fear that these consumers will become the primary focus of the Distribution Companies (DisCos).
Currently, Nigeria is generating approximately 4,000MW of electricity, which falls significantly short of meeting the needs of its 12 million consumers. This shortfall has raised fears that the DisCos, who were recently fined N10 billion and warned against issuing exorbitant bills to consumers, may prioritize the 15% of consumers who pay higher tariffs, leaving the rest in dense darkness.