06/04/2024
Increase in electricity tariff ….
We all know Nigeria's problems are basic and easy to solve. We all agreed that the cost of governance needs to be reduced drastically, but nothing tangible has been done apart from lip service. We know that subsidies for those on pilgrimage and state-sponsored are bad, but because the beneficiaries are the elites, nothing has been done apart from lip service. N90bn of our money will be used to subsidise Hajj this year. Removing subsidies on PMS is another good policy, but that has yet to be true in Nigeria. Of course, we all know that corruption is killing Nigeria, but we all refuse to stop our corrupt tendencies.
We all have our share of the blame, but most importantly, our leaders are out of touch and ideas. You cannot tell someone on N30,000/month not to be corrupt in Nigeria or cut corners by passing electricity meters. The Nigerian Electricity Regulatory Commission, NERC, has approved an increase in electricity tariff to N225 ($0.15) per kilowatt-hour from N68. This 300 per cent hike takes effect from April 1, 2024. If you look at the percentage increase, you will be surprised, and it will not take effect in 3 or 6 months but immediately. That is the highest level of insanity when the economy is practically down, and people and businesses are barely surviving.
The average household consumption in France is estimated at 4700 kWh/year or about 12.88 kWh/day. Dutch households use an average of 10.39 kWh per day. The average household in China uses about 5.44 kWh per day. In Saudi Arabia, the average monthly and yearly energy consumption per dwelling was between 30,832 and 36,166 and 1500 to 4500 kWh, respectively. The average hourly electrical energy consumption during working days was 4.12kWh. Let us assume that Nigeria's average household will consume approximately 2kWh/day. If we cannot put on the AC and need to turn off our freezers as directed/suggested by the minister, we would need at least 2kWh conservatively.
Three hundred sixty-five days (365) x 2kWh =730 kWh yearly energy consumption per dwelling = N186,150, which is almost six (6) months' salary of the minimum government wage of N30,000/month.
At least if the government want to increase the electricity tariff, there should be a plan for businesses/SMEs and struggling families with some home energy support payments.
The second issue I have is with band pricing. Band pricing is not new, but it is fairly applied as a tax rate band, where income is taxed at a particular percentage (tax rate). The higher you earn, the higher your tax rate. The same fairness is true in council (like LGA) rate bands. Assessments are based on several factors, such as a property’s size, layout, character, location, change in use, and value. Obviously, someone in Ikoyi is likely to be better off than someone in Agege. Using an hour of electricity supply is not fair to those struggling in less privileged areas. What difference does it make if you use electricity 2 hours a day or 24 hours a day? The rate should be the same, and you will pay for what you use.
If they wanted to introduce banding, it could have been time bands. The time bands are the periods when the price of electricity (the price for each kWh you use) varies depending on the time when it is consumed. The day is divided into three-time bands: Peak hours, standard hours and off-peak hours. That could have been more appropriate, in my view. The fact that you have 24 hours of electricity should not be why you pay more. It just doesn’t make sense and more people will cut corners.