LAGOS, Nigeria (VOICE OF NAIJA) – The Federal Government has stood by its decision to implement a 240 per cent increase in electricity tariffs for consumers in the Band A ‘ category, despite opposition and threats from the Nigeria Labour Congress (NLC).
The government had disclosed that the subsidised electricity pricing would only be temporary, with a plan to gradually transition to fully cost-reflective tariffs over a period of three years.
However, the Nigeria Labour Congress (NLC) has opposed the decision, warning the Federal Government to brace itself for the repercussions of the tariff hike.
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The NLC criticised the move as unjust and unpopular, emphasising that by prioritising the advice of the World Bank and International Monetary Fund over the interests of its citizens, the government should be prepared to face the consequences.
The Head of Information, NLC, Benson Upah, told Saturday PUNCH, “We did say earlier that this tariff hike is insensitive and unpopular. So if the government decides to continue with the hike or persists in something that is evil, I’m sure it is equally prepared for the consequences of that evil.
“The manufacturers are saying this is going to hurt businesses and make the environment more hostile, and we also said so. There is no place in the world where high power tariffs have supported manufacturing. Not even in the developed world.
“So, it completely beats our imagination for the minister to have the audacity to say that the policy would continue. What this means is that the minister and the President are not in charge. It is saddening that the minister elected to pursue an unpopular policy.”
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Upah added, “It shows that the minister and the President are not in charge. The people in charge are the World Bank and the IMF. They are the ones driving this highly injurious policy.
“So, our leaders should be prepared for the consequences of this highly injurious policy. That is what I’ll say about this issue for now.”
Manufacturers and organised labour strongly opposed the tariff increase imposed by the Federal Government, affecting approximately 1.9 million consumers.
This hike, which was announced during a press briefing in Abuja by the Nigerian Electricity Regulatory Commission (NERC), saw the complete withdrawal of electricity subsidies for consumers in the BandA category, comprising around 15% of the country’s total 12.82 million power consumers.
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The new rate of N225 per kilowatt-hour represented a staggering 240% increase from the previous rate of N68/kWh.
The government announced that the decision came into effect on April 3, 2024. However, the Organised Private Sector, NLC, and the Trade Union Congress opposed the tariff increase for power users, demanding its reversal.
They contended that the hike would force manufacturers out of business, exacerbate inflation, and hinder small and medium enterprises Additionally, they noted that there was no place in Nigeria currently enjoying up to 20 hours of power supply daily.
BandA power users are those who get up to 20 hours supply of electricity daily.
Minister of Power, Adebayo Adelabu, stated at a press briefing in Abuja that the government would uphold the new tariff for BandA consumers despite calls for its reversal.
Adelabu highlighted the unsustainable cost of power subsidies, estimated at about N2.9 trillion for 2024.
The minister said, “We are in the subsidy pricing regime, whereby the government provides a large portion of the cost of producing, transmitting, and distributing power.
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“I must tell you that as of today, before the introduction of the tariff increase, the government is subsidising nothing less than 67 per cent of the cost of producing, transmitting and distributing electricity in Nigeria.
“At the current exchange rate, this is going to translate into N2.9tn for 2024. This is more than 10 per cent of the national budget. The power sector is just a single sector out of the many sectors that the government has to attend to.”
Adelabu said other sectors and ministries were competing for government funding and that “it will be very insensitive on our part to force or compel the government to continue to subsidise at the rate of almost N3tn for the power sector alone. We just have to be realistic and considerate.”
He highlighted that discontinuing the subsidy for Band A customers would save the government approximately N1.4 trillion. This amount would then be redirected towards the development of sectors like healthcare, education, infrastructure, and others.
The minister argued that the tariff hike benefited lower-income residents who could afford it. However, he clarified that electricity subsidies would only be temporary.
He explained that the Federal Government intends to stop subsidising power within three years, starting with the withdrawal of subsidies from Band A customers as a pilot phase.
He said, “This tariff review conforms with our policy thrust of maintaining a subsidised pricing regime in the short run or the short term with a transition plan to achieve a full cost-reflective tariff for over a period of, let us say three years.
“I have mentioned it in a couple of media briefings that it is because of the government’s sensitivity to the pains of our people that we will not make us migrate fully into a cost- reflective tariff or remove 100 per cent in the power sector like it was done in oil and gas sector.
“This is more like a pilot for us at the Ministry of Power and our agencies. It is like a proof of concept that those that have the infrastructure sufficient enough to deliver stable power and enjoy 20 hours of light to be the ones to get tariff hike.”
The Abuja Electricity Distribution Company Plc (AEDC) applied the new rate of N225/kWh to all consumer bands within its franchise areas, defying the directive that only Band A customers should pay the new rate.
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Consequently, NERC fined the firm N200 million for breaching its Supplementary Order on the April 2024 Multi-Year Tariff Order.
Many customers of the AEDC, who were not in Band A, reported increased bills to N225/kWh.
Reacting to the development in a statement, the power sector regulator said, “The Nigerian Electricity Regulatory Commission has taken enforcement action against the Abuja Electricity Distribution Plc for non-compliance with the Supplementary Order to the April 2024 Multi-Year Tariff Order 2024 for the AEDC.
“The AEDC has been fined ₦200,000,000 for failure to comply with the prescribed customer band classifications for the tariff billing.
“This decision follows a detailed review and customer feedback, which revealed that the AEDC had applied the new tariff to all customer bands, contrary to the order, which was designed to ensure fair billing practices.”
The commission stated that the AEDC was therefore mandated to: “a. Reimburse all customers in bands B, C, D and E, respectively, who were billed above the allowed customer categories/tariff bands provided in the order.
“b. Reimburse through the provision of the balance of customer tokens that the affected customers would be entitled to receive at the applicable rates and all token reimbursements shall be issued to the affected customers by April 11, 2024.
“c. Pay the sum of N200,000,000.00 as a fine for the flagrant breach of the commission’s order. d. File evidence of compliance with the directives in a and c with the commission by April 12, 2024.