Much Ado About Electricity Tariff Hike

The Insight by Lateef Adewole

There is a Yoruba proverb that says “iku ti o n pa ojugba eni, owe lo n pa fun ni” (whatever affects one, can affect all). One might use this to describe the reactions that trailed the recent announcement of a hike in the electricity tariff by the Nigerian Electricity Regulatory Commission (NERC) on April 3rd, 2024, for a category of users in Band A. This is the category whose areas are expected to enjoy power between 20 to 24 hours. Truly in Nigeria today, such areas can be considered as “the big man or elite” areas. Where many areas hardly see light in days, weeks or even months, such level of service is actually for the ‘privileged’.

Band A is one out of five categories of consumers. Others are Band B (16 to 20), Band C (12 to 16), Band D (8 to 12) and Band E (less than 8). All in hours. Each of these bands is charged at different tariff rate based on these number of hours they enjoy. However, in this recent increase, only Band A was affected. The tariff was increased from N68 to N225 per unit (kwh). This has attracted serious criticism. Ironically, not only from the ‘victims’, but majority of Nigerians who do not belong to that band also joined in the frail. NLC, in their characteristic manner, has even threatened government about it. Is it a case of “t’ojo ba n pakan ore, gbogbo wa lo jo n pa?” (injury to one, is injury to all).

Negative reactions from those directly affected are understandable but from those considered ‘poor masses’ who were spared, was strange. All along, the common slogan has been “let the poor breathe.” Since the coming of the Tinubu’s administration, many people have labelled it as “government of the elite, for the elite, by the elite” (quoting a part from the recent article of Prof. Farooq Kperogi on the same matter). To ordinary mind, now that it is the elites and the rich who are at the receiving end of the tariff hike, how is that still the problem of the poor?

What I have observed and known about Nigerians over the years is that, emotions drive many actions. Majority hardly think things through before reacting. Many actually are completely ignorant about what they are reacting to. They just follow the crowd in a mob action-like way. Just like in the election matters, many Nigerians are low-information citizens. Therefore, they only base their knowledge, decisions and actions on what others say, whether true or false, right or wrong. This is a big problem generally.

In the current matter, is this increase justified? Is it right? Do I support it? These, and many other questions are what I have been asked by many friends and readers, who sought my opinion on the matter. After I have answered multiple times, I decided to write about it, instead of having to respond to hundreds of queries to come. And this is it. My position is not as simple as a yes or no, for many reasons. This is because, “o ye omo to n sunkun, o si ye iya re to n re.” All parties making their stands have valid reasons to the extent that they were right.

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These include the regulatory body, NERC, that is representing the government in this matter. Then the distribution companies (DisCos), who are the last leg of the power sector that is closest to, and dealing directly with, the public. And the consumers, the general public themselves. Everyone has their roles and responsibilities that they were / are expected to play, which they have failed or failing, reason why we will always have such a situation at hand.

To start with, the first constitutional responsibility of government is the welfare of the citizens. Government exists for that. Providing uninterrupted power supply ranks among top welfare needs of the people, both for domestic use for better life and living, and commercial use for economic progress and survival. So, when government fails as they have been doing for decades, such government cannot be said to be responsible. If in 110 years after amalgamation and 63 years after independence of Nigeria, we can only boast of less than 5000mw distributable power for a population of over 200 million people, then, successive administrations have failed.

Despite billions of dollars that have gone into the sector, continous evolution and transition, to the current privatised entities, and we are still here, it is a mark of leadership failure, caused by corruption. Where is the money? All the billions of dollars invested over the years, where are they? What impacts have they made? We know that much efforts have gone into boosting power since the last Buhari’s administration, which Tinubu’s government is building on, the people will only appreciate it when they have electricity in their homes and work places. We hope they succeed.

The other failure on the part of government is poor oversight over the DisCos and weak regulations by NERC. Despite spelling out the rules of engagement when the sector was privatised, NERC often failed in living up to their responsibilities, which bother on protecting the consumers by ensuring they get value for their money, while ensuring that the DisCos earn their due returns too. However, this laxity that is often observed made many DisCos to go rogue, doing as they like and committing numerous infractions, at the detriment of the masses.

There are three segments of the power sector: generation (24 GenCos), transmission (owned by government through the Transmission Company of Nigeria TCN) and Distribution (11 DisCos). The last ones are closest to the people, deal with them directly through selling of energy to them. When privatisation took place, there are terms that were agreed to. It was expected that as time went on, there would be continous investments (financial and technical) in the sector through infrastructure upgrades, reduction in the Aggregate Technical, Commercial and Collection (ATC&C) losses, improvement in the quality of service, metering, etc, while tariff will also be adjusted gradually overtime, accordingly.

However, from the point of view of the public, it seems the only concern of DisCos is tariff increase. In fact, all their activities in relating to the consumers are geared towards increasing their revenues and profits. Consumers are not seeing much efforts on other mandates. This is why all they do infringe on the peoples’ rights in their desperation to make more money and profit.

Non provision of meters, criminally outrageous estimated billings, decaying infrastructures, long period of down time before fault clearing, non-replacement of faulty equipment such as transformers, electric poles, overhead conductors, transformer cables, etc, at all or promptly, making the customers to be forced to procure them to avoid being in perpetual darkness, and still without refund, contrary to the stipulated regulations guiding their operations. And what does NERC do? They look away, indulge them or complete negligence in most instances, if not compromise. So, the DisCos were having field day, riding roughshod on the people.

So, when the latest increase came, as it was already being flagged since last year, the reaction against it was swift, despite that it only affected one band. Others believe that “papa ti a fi na iyaale, o n be laja fun iyawo.” What befalls Band A today will likely befall others in future. It is a matter of time. It is therfore better for everyone to go against it now. That must be the feeling.

Now to the final consumers, the general masses, is their anger against the DisCos and government justified? Yes. Given all that have been listed above as failures of the two, it is unacceptable anywhere to anybody to be paying for what they did not consume. Those worst-hit are unmetered customers on estimated billings. They bear larger brunt as they generate money for the DisCos even if they receive darkness in exchange. However, in this particular case, as explicitly enunciated, that reaction, I believe it was overkill on the part of the people.

One, as stated by NERC, the increment will only affect about 15% of the users who consume 40% of the whole power distributed. They account for about 1.82m of the 12.12m total consumers. These are ‘privileged’ ones as stated earlier, if they can enjoy 20 to 24 hours of electricity. That’s awesome.

Quoting a report on this: “Data in the MYTO 2024 Supplementary Order showed that the new tariff was approved after due consideration of increases in economic indicators namely: 12 per cent inflation rate from 28.2 per cent in January 2024 to 31.7 12 by March 2024; exchange rate rose by 59 per cent from N919.39/$1 to N1,463.30/$1; 63 per cent generation cost from N63.8 per kilowatt hour to N103.9/kWh. Also, transmission and admin cost rose by 34 per cent per kWh from N6.8/kwh to 9.1/kwh while wholesale gas to power prices rose by 11 per cent from US$2.18/MMBTU to US$2.42/MMBTU. The commission also calculated that the newly approved tariffs, subsidies for the 2024 fiscal year are expected to reduce by about N1.14 trillion in furtherance of the federal government’s realignment of the subsidy regime.”

Unfortunately, in Nigeria, people love free or cheap things, while still demanding for top quality. These are inversely related factors. We don’t like to pay bills and like to cut corners. There is no gain saying that public power supply remains the cheapest source of energy when and where available. The opportunity cost of it is enormous. Well, may be not as cheap as using renewable energy sources like solar, in the long run (this is my company’s interest).

At this supposed ‘outrageous’ rate of N225/kwh, those who are in this band know that what it will cost them for 24 hours of power in a day or month from the DisCos will be far lower than using alternative like running generator. Apart from the cost of procurement of generators, there are many associated costs and inconveniences; the noise pollution, the maintenance and repair costs, and the cost of diesel or petrol is the real death!

Let’s use a case study. Supposing someone uses 1 unit per hour of electricity, that will be 24 units per day at N225, totalling N5,400. In one month, that is N162,000. On the face value, this is huge, as painted by the critics of the increase too. They even juxtaposed it with minimum wage of N30,000. per month and the inability of many people to earn as much as this amount in a month, as their basis for the antagonism. But the truth of the matter is, ‘majority’ of those who live in Band A areas don’t earn N30,000. minimum wage. They are well-to-do, majorly. Hence, that argument falls flat on its face.

Now, let’s look at the alternative to this public power. If a diesel generator is to be used to provide equivalent power at 1 litre of diesel per hour. That will be 24 litres per day. At a price of N1,500. per litre, that will be N36,000. per day, already higher than the minimum wage per month. In one month, it will be N1,080,000. (over one million naira). So, what will the verdict be? This is why I said that many critics are either mischievous or completely ignorant.

Many Nigerians also have penchant for criticising everything government does. It gives them kicks. Worse still is the time that we are with the Tinubu and his government of multiple ‘enemies’, mostly partisans. Many still carry on with their pains from an election they lost over a year ago. When you listen to them, or read what they say or write on social media, you would think the election took place yesterday, with the level of venom they vomit. It is so disheartening. Such people look for every avenue to discredit Tinubu and his government. They latch on anything and everything to attack him. And they are plenty on social media platforms, sadly. So, it is their noise that will be loudest.

Apart from this cost-benefits comparative analysis above, this Band A areas enjoy the topmost quality of everything service from the DisCos. They are nearly fully metered (as high as 99%), many of which were given to them free of charge, contrary to what majority in other bands go through to get meters. They pay through their noses. I paid as many times as twice before I got my meter. Again, the DisCos ensure that their power infrastructures are in top shape and they respond to complaints from them more promptly. This is because, with all houses metered, if they don’t supply power, they don’t make money as vending of energy units won’t happen.

With the preponderance of energy meters, Band A customers have the advantage of controlling their consumption. This engenders energy discipline with control of what they use and how they use power. They can regulate their expenditures on energy. Many on other bands don’t have this luxury, with many on estimated billings.

By the way, this idea of higher tariff based on greater number of hours of supply was actually initiated and sowed in the minds of DisCos by energy consumers in some communities in Lagos and Abuja. They are some “big man” estates / areas. They met with the power distribution companies and proposed that if they could be given 24 hours per day, they would pay far and above the then average tariff, with condition of being fully metered as well. This was agreed to by DisCos and the rest, as they say, is history. That must have given them the idea of tariffs scaled based on hours. It is still such areas that fall under Band A. Why should they complain now? Those who sow wind, will reap whirlwind.

My only concern and demand in this matter will be that the DisCos must fulfil their own part of the bargain. It will be unacceptable that after charging such high rate, they fail to meet their minimum threshold of 20 hours per day. This is enough basis for downgrade over time. NERC gave seven day grace. Again, there will still be very few without meters, whether due to the fault of customers or oversight from DisCos, they should all be immediately metered to avoid being cheated. Before that is done, any estimated bills to be given to them should be in line with NERC Capping law that stipulates how many units each customer on estimated billing cannot be charged beyond. DisCos violate this with impunity as it is the avenue to fleece innocent consumers with criminally outrageous bills. This will not be acceptable.

It is also incumbent on the people to be disciplined. Most unmetered customers also abuse it by using power recklessly as they feel they will still pay same amount, whether they use or not. Also, the case of energy theft remains a big problem in the sector. The technology for a foolproof anti-power theft is yet to be available here. DisCos only use native approaches like mounting meters on high poles or walls where they are not easily accessible for tampering. There are people who use power year in year out, without paying kobo because they don’t have meters, or on any estimated billing.

In some cases, this is done in connivance with the field staff of the DisCos who help them to do it or cover them up where discovered while they collect certain amounts for themselves from such illegal consumers on monthly basis. This is the call of the companies to address by regular energy audit and doing regular KYC. The citizens should also protect power infrastructures within their communities. They should realise that they will be the ones to suffer for any vandalisation and pay for them directly as it usually happens when they buy them back themselves or indirectly as the cost will be part of energy cost that they pay for their consumption.

In all, regular power availability and supply to final consumers is critical to better society as it improves the wellbeing of the citizens and improves security situation with better visibility within communities. “Oru laa s’eka” (evils are committed in the dark of the night). It is also critical to the industrialisation of any country. Most companies that folded up and left Nigeria did so because of power. This needs to be reversed by improving on it. This has far wider implications like increase in employment opportunities, increase in personal incomes, more personal and company taxes payable, contributing to increasing GDP and a better economy.

Government and DisCos should also know that all Nigerians, irrespective of social status or class, deserve uninterrupted power supply, not this selective and discriminatory practice, which seem to define our society at large. Afterall, we are all human beings and we are all Nigerians. We all deserve better and equal treatment in the Nigerian state. We cannot continue to act in such “racist” manners, ad infinitum. A word is enough for the wise!

May God continue to protect us and guide us aright.

God Bless Nigeria.

You can follow me on:
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April 13, 2024.