Nigeria Rebalances Electricity Tariff for Competitiveness

I wrote this, supporting the thesis that Nigeria must have reflective pricing, even as it works to find ways to subsidize electricity for industrial customers: “There are 3 classes of electricity customers – Residential, Commercial and Industrial. You use reflective tariffs for residential (homes) and commercial (like bank offices) while you subsidize industrial (like cement, biscuit factories). In Ethiopia, Dangote Cement – an industrial customer – receives massive subsidies and runs on the national grid.

“In Nigeria,  the company  is not connected to the grid as they have an independent power plant. That creates a big problem for DISCOs – some of their best customers in Nigeria have alternatives to the national grid, and even if you invest and improve capacity, you are left with residential and low-tier commercial customers which to a large extent are challenging to serve and not as lucrative as the industrial.”

Today, Nigeria has a playbook: “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.”

Good People, that is a good policy. In all industrialized nations, electricity is subsidized for industrial customers. And Nigeria running its tariff in bands is a good policy, provided “connections” will not enable some people/companies to switch bands for tariffs.

Now, the big questions: would some Band A customers go to court? Recall the last time this happened, they went to court and a judge ruled for them, against tariff increase, causing dislocations in Nigeria’s electricity sector.

I wrote this, supporting the thesis that Nigeria must have reflective pricing, even as it works to find ways to subsidize electricity for industrial customers: “There are 3 classes of electricity customers – Residential, Commercial and Industrial. You use reflective tariffs for… pic.twitter.com/BOAXjlCz6T

— Ndubuisi Ekekwe (@ndekekwe) April 3, 2024

Comment: Doing what industrialized nations do without being industrialized does not industrialized Nigeria. In priority, is hiking the electricity prize a great step in today’s Nigeria? What’s the Multi-Dimensional Poverty rate across Nigeria today?

My Response: The electricity rate in Nigeria is such a mess that no company will invest in that, unless it is a charity. We have to be real and deal with that. In some states, water rates were last reviewed in 1997. That is why no investor goes there. Unless we want charities, these changes must be made for REAL investors! I can tell you that the government will get: “we like your market but we cannot invest in those rates because we cannot make money”.

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