Nigeria increases electricity tariff for premium customers

The Nigerian Electricity Regulatory Commission has recently announced an increase in the tariff for electricity customers under the band A category to 225 naira per kilowatt. This move has sparked a debate on the implications for consumers and the power sector as a whole. In a recent interview with CNBC Africa, George Etomi, Chairman of West Power and Gas, shed light on the rationale behind this decision and its potential impact. The key theme of the discussion revolved around the challenges posed by the rising cost of gas, the need for sustainable energy sources, and the importance of stakeholder consultations in driving effective policy decisions. Here are the key points from the interview: 1. Gas Pricing and Sector Sustainability: Etomi emphasized the critical role of gas in the electricity value chain, accounting for approximately 70% of the tariff. The recent adjustment in gas prices, from $2.18 to $2.42 per BTU, has prompted the tariff increase to ensure a reliable gas supply for power generation. The move aims to address the longstanding issue of gas availability, which has plagued the sector and led to erratic power supply. By aligning gas pricing with the demands of producers, the government seeks to incentivize consistent gas supply, thereby improving overall electricity generation. 2. Subsidy Reallocation and Consumer Impact: The decision to shift the burden of subsidy to band A customers reflects the government's strategy to rationalize costs and promote cross-subsidization within the sector. While the tariff increase may pose a significant challenge for premium customers, Etomi highlighted the need for improved service delivery to justify the price hike. He emphasized the importance of ensuring that consumers receive value for the increased tariffs, particularly in terms of consistent power supply and reduced reliance on alternative sources like diesel. 3. Stakeholder Consultations and Policy Implementation: Etomi underscored the importance of engaging critical stakeholders in the power sector to facilitate a transparent and consultative approach to policy-making. Drawing from his experience with the Presidential Power Advisory Council, he emphasized the need for a gradual and transparent tariff adjustment mechanism to enable consumers and businesses to adapt to the changes effectively. By learning from past mistakes and maintaining a steady trajectory of tariff adjustments, the sector can instill investor confidence and attract much-needed capital for infrastructure development. In conclusion, the tariff increase for premium customers signals a pivotal moment for the Nigerian power sector, underscoring the urgency of addressing systemic challenges and driving sustainable growth. As the industry navigates the complexities of pricing, subsidy reallocation, and stakeholder engagement, the key lies in achieving a delicate balance between cost recovery, service quality, and consumer affordability. By leveraging these insights and fostering a collaborative approach, Nigeria can pave the way for a resilient and vibrant energy landscape that meets the needs of its diverse population.