A few hours after the news broke out that approval for the hike in tariff was given by the Nigerian Electricity Regulatory Commission to take effect from January 1, 2021, the NERC issued a statement, denying a 50 per cent hike as had been reported in some circles.
The regulatory agency however blamed N2 to N4 adjustment in tariff on inflation and movement in foreign exchange rates.
In a swift reaction to this, the Trade Union Congress issued a stern warning, asking the Federal Government to revert to old electricity tariff or face the consequences of its action.
It would be recalled that the NERC had announced the tariff hike in its December 2020 minor review of the Multi Year Tariff Order and Minimum Remittance Order obtained by our correspondent in Abuja on Tuesday.
The tariff increase is taking effect just two months after the government through NERC implemented a hike in November 2020, which saw widespread opposition.
The MYTO Order NERC/225/2020 containing the latest tariff hike, was signed by the new Chairman of NERC, Sanusi Garba, and it supersedes the previous Order NERC/2028/2020.
In attempt to justify the latest tariff hike, the commission said it considered the 14.9 per cent inflation rate rise in November 2020 and foreign exchange of N379.4/$1 as of December 29, 2020.
Available generation capacity, the United States inflation rate of 1.22 per cent and the Capital Expenditure of the power firms were the other considerations before the tariff was raised.
The commission also stated that the new tariff would be effective till June 2021 while a Cost Reflective Tariff would be activated from July to December 2021.
Last month, the commission had stated that it was carrying out a review for another tariff, hence the latest order announcing an increase in the rate payable by consumers.
The commission raised electricity tariff in September last year but faced stiff opposition from the organized labour, as the unions threatened to embark on a nationwide strike. It was after series of negotiations that the tariff was reduced based on consumer classes and the hours of power supply received by a user.
In November 2020, power distribution companies commenced the implementation of the revised electricity tariff that was jointly agreed upon by the organised labour and the Federal Government.
From all indications, by the latest MYTO review, some power users would pay as much as N12 extra as electricity tariff. For instance, Ibadan Disco had an end-user allowed tariff of N34.1 per kilowatt-hour in 2020, but this was increased to N46.5 for the period of January to June 2021. It was further hiked to N57.1/kWh for July to December 2021, meaning that Ibadan Disco is allowed to collect this much from customers under its franchise areas.
In a public notice on the matter, the NERC stated that it only hiked the tariff of some selected classes of consumers.
The commission argued that it never hiked tariff by 50 per cent, adding that it remained committed to protecting electricity consumers from failure to deliver on committed service levels under the service-based tariff regime.
In statement by the TUC President, Quadri Olaleye, and the Secretary-General, Musa Lawal, the Trade Union Congress reprimanded the Federal Government over the hike recently announced.
It described the decision as ‘wicked’ and ‘another betrayal of trust’. The union therefore asked the government to revert to the old price or face the consequences of its decision.
The congress wondered “why this government espouses unfriendly policies that are capable of crippling the economy.” It said many companies which could not pay the previous tariff hikes had either closed shop or relocated to neighbouring countries.
The TUC stated, “Does it mean there is no other way this government can creatively generate revenue? It has become obvious that the outrages from the organised labour and the masses and the series of negotiations we had with the government were just cosmetic and hypocritical.
“There is so much deceit and laziness in the system; there is hardly any promise made that they have followed through.
“Only yesterday (Monday), we read again that the Academic Staff Union of Universities is withdrawing its members because this same government has reneged on its promises reached a few days ago.
“How can the government go-ahead with increase in tariffs again when we have not resolved the one done earlier? This is preposterous, ridiculous and sheer wickedness.”
The congress stated that, “The economy was struggling before the outbreak of the pandemic and we thought it wise not to worsen our situation. The sacrifice means nothing to these people, who forced us to tighten our belt while they loosened theirs.
“Darkness enhances criminal activities and now they have chosen to keep us in the darkness thinking their high fences will save them. We call on the government to be responsible for once. Nigerians will like to know what we gained from border closures. Insecurity did not stop, neither did it stop the smuggling of rice and others.”
While warning that the government should not push the organised labour to the wall with its harsh policies, TUC stated, “You don’t just churn out policies without weighing the pros and cons. How many people can afford to pay the last bill talk less of this recent one? The organised labour should not be pushed to the wall because it will actually do all no good. The government must revert to the old price or be willing to accept the outcome of this decision. This is a betrayal of trust and it is unfortunate.”
The Director-General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, said there should be a strategic approach to electricity pricing to avoid pushback from the consumers.
He said, “Only two months ago, there was a review. Now another review. The commercial arguments may be strong, but there is a social context to be reckoned with, especially given the kind of product in question.
“It is also important to reckon with the economic and political ramifications of such price reviews. We need to worry about the sensibilities of the people.”
While reiterating the group’s support for a cost-reflective tariff for electricity, Yusuf said the transition to the new pricing regime should be strategic and gradual to minimise shocks and risk of pushback by the consumers.
According to him, context matters in policy conceptualization and implementation. He therefore stated that “The economy is currently in a recession, purchasing power has been significantly eroded across all income classes, poverty situation has been worsening, and there is spiralling inflation, there are fresh concerns about resurgence of the COVID-19 pandemic.
“These contexts should have a moderating effect on price movement at this time, especially for a product of high social significance. It is important to take these factors into account in order not to put the entire reform process at risk.”
The President, Electricity Consumers Association of Nigeria, Mr Chijioke James, expressed consumers’ opposition to the fresh hike in electricity tariff, describing it as ill-timed.
“Why would the government increase tariff at the beginning of the year, especially a time when unemployment is on the increase, disposable incomes of the citizens continue to deplete, inflation is galloping? This is evidence of insensitivity of leadership at a time like this,” he said.
From the Ivory Towers, a professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Prof. Sheriffdeen Tella, said electricity tariff should not be increased at this point.
He said, “The electricity tariff is not supposed to be increased even if there is no second wave. They have not been quite efficient. In fact, what we are paying for is inefficiency.
“They are not efficient in collecting their tariffs from everybody using electricity and that is where they are supposed to concentrate on, instead of taxing those who are paying to pay more.”
Tella called for the use of technology in collecting money from consumers.
Viewing from another angle, Head of Tax, PricewaterhouseCoopers Nigeria, Mr Taiwo Oyedele, lauded the increase, saying he had advocated for people at the top to pay more for electricity consumption since they relied on it for several purposes.