The 2022 electric tariff increase in Nigeria has been met with significant resistance from consumers and businesses alike. While the government cites the need to improve infrastructure and reduce dependence on fossil fuels as reasons for the increase, the reality is that it will disproportionately affect those who are already struggling to make ends meet.
The increase, which ranges from 50% to 100%, will have a significant impact on average Nigerians, both in terms of their financial situation and their access to electricity. It also comes in the middle of a national fuel crisis, and barely months after the NERC raised tariffs by another 50 % last September.
One of the primary disadvantages of the electric tariff increase is that it will lead to a rise in the
cost of living for many Nigerians. Electricity is a crucial component of modern life, and an increase in the cost of electricity will mean that consumers will have to pay more for everything from powering their homes and businesses to charging their phones and running appliances.
This will have a cascading effect, as businesses will also have to raise prices to cover their increased energy costs, which will further strain the budgets of everyday Nigerians.Another disadvantage of the electric tariff increase is that it will disproportionately affect low- income households and small businesses.
These groups are often the most dependent on electricity and have the least ability to absorb the additional costs. This could lead to a widening of the income gap, as those who are better off will be able to afford the increased tariffs while those who are struggling will not. Additionally, the tariff increase may also lead to job losses, particularly in small and medium- sized enterprises (SMEs) that are heavily dependent on electricity.
As these businesses struggle to cover their increased energy costs, they may be forced to cut back on staff or even close down entirely, which will have a negative impact on the Nigerian economy and job market. Lastly, there is also the issue of corruption and mismanagement in the Nigerian power sector.
Even if the tariff increase is meant to improve infrastructure, there is no guarantee that the funds
will actually be used for that purpose. Instead, they may be siphoned off by corrupt officials or
misused in other ways.
According to data from the Nigerian Bureau of Statistics, the average Nigerian household consumes approximately 300 kilowatt hours (kWh) of electricity per month. With the proposed tariff increase ranging from 50% to 100%, the average household’s monthly electricity bill could increase by between NGN 1,500 and NGN 3,000.
However, it is important to note that not all households consume the same amount of electricity. Data from the Power Holding Company of Nigeria (PHCN) shows that 20% of households consume less than 150 kWh per month, while 10% of households consume over 600 kWh per month.
The proposed tariff increase will likely have a disproportionate impact on these households, with
low-income households who consume less electricity bearing a higher burden compared to
high-income households who consume more. Additionally, data from the National Bureau of Statistics shows that the average Nigerian household income is approximately NGN 130,000 per year.
This means that the proposed increase in electricity tariffs could represent a significant portion of the average household’s income, putting further financial strain on an already stretched economy. It’s a dangerous game this administration is letting the NERC play. And the government cannot sit back and claim neutrality, they are supposed to be the regulators in the privatization quandary they dragged the unwilling public into.
Privatization of public services rarely ever goes according to plan anywhere on the globe, because the bottom line for private investors at the end of the day, is profit, and not public service. If the NERC and private energy stakeholders keep pushing their luck and raising prices; at what junction will the people snap? In the meantime, as always, average Nigerians continue to pick the tab.