In a move that has sent shockwaves through the nation, Nigeria’s electricity regulator has approved a significant increase in tariffs for the country’s higher-consuming customers. This decision comes as the government seeks to alleviate the strain on public finances by reducing subsidies. The Nigerian Electricity Regulatory Commission (NERC) announced the immediate implementation of the new rates, which have risen from a maximum of 68 naira per kilowatt hour to 225 naira. This change affects just under 15% of the customer population in the Nigerian electricity supply industry. The decision to increase tariffs is part of a broader economic reform agenda initiated by President Bola Tinubu. Last year, he scrapped a popular but costly fuel subsidy and allowed the currency to devalue sharply. These reforms, aimed at reviving growth, have led to inflation rates of over 30% and exacerbated the cost of living crisis, leading to widespread discontent among workers. Despite these challenges, the World Bank has previously recommended subsidy cuts to help Nigeria improve the state of its public finances. The last review of electricity tariffs in the country took place in 2020. Nigeria’s electricity sector faces a myriad of problems, including a failing grid, gas shortages, high debt, and vandalism. The country has 12,500 megawatts of installed capacity but produces only about a quarter of that, leaving many Nigerians reliant on expensive diesel-powered generators. State-controlled power tariffs have been too low to attract new investors and allow distribution firms to recoup costs and pay generating companies. This has left the sector with ballooning debts. Despite the challenges, there is hope for the future. The tariff increase could potentially attract new investors to the sector, leading to improvements in service delivery and ultimately contributing to the country’s economic growth.
Source: Reuters
