Nigerians may need to brace up for tougher times as electricity tariff is set to increase by over 40 percent from July 1, 2023.
This rise follows the unification of the naira, which has led to the depreciation of the naira at the investor and exporter window.
Recall that the Central Bank of Nigeria (CBN) recently made an announcement regarding the unification of all segments of Nigerias forex market, consolidating all windows into one.
According to informed stakeholders, this new system will allow market forces, such as supply and demand, to play a significant role in determining the exchange rate.
These changes were implemented as part of a broader effort to enhance liquidity and stability in the Nigerian Foreign Exchange (FX) Market. Under the new policy, all transactions will be conducted through the Investors and Exporters (I&E) window, where the exchange rate will be determined by market forces.
Aside from the unification of the naira, the already removed subsidies on Premium Motor Spirit (PMS), or petrol, have also 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, NERCs current Service Based Tariff (SBT) was benchmarked on an exchange rate of N441/$ and inflation of 16.97 per cent.
Currently, the inflation rate is 22.41 percent, and some experts have projected that it would hit 30 percent by the end of June given the floating of the naira and subsidy removal on petrol.
Most stakeholders said 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 per cent as purchasing power remains a challenge in the face of unemployment and poverty.
As of the time of filing this report, available electricity on the grid stood at 3,057.7MW from 17 power plants. The average load intake of all the DisCos in the last four months averaged 3,000MW, a development that follows the persistent push to make the DisCos meet up with 100 per cent of their remittance orders.
With the question of affordability emerging as a major consideration as the grid remains unreliable, forcing it to make losses, stakeholders have expressed fear that Nigerian electricity supply market may face tougher times managing outlook due to apathy that may come from consumers who are losing hope in the system and resorting to alternative energy.
