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Government’s 240% Tariff Increase Faces Opposition from Manufacturers and Labour

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Expressing their discontent, manufacturers and organized Labor have strongly criticized the Federal Government’s decision to raise the electricity tariff by 240% for users receiving 20 hours of power supply.

They have emphasized the importance of retaining the electricity subsidy, cautioning that its elimination could drive manufacturers out of business and exacerbate inflation.

The subsidy on electricity has been entirely removed from the tariff for consumers in the Band A category, constituting approximately 15% of all power users nationwide.

The government publicized the tariff increment during a press conference in Abuja by NERC on Wednesday, revealing that affected users would now be charged N225 per kilowatt-hour, up from the previous N68/kWh, marking a significant 240% surge. The new tariff came into effect as of yesterday, according to the government.

The organized private sector, Nigeria Labour Congress, and the Trade Union Congress have all rejected the raised tariff for power consumers, whether in Band A or not.

They argued that the tariff hike would force manufacturers out of operation, intensify inflation, and stifle small and medium enterprises, highlighting that no region in Nigeria receives up to 20 hours of daily power supply.

Band A users are those who previously received up to 20 hours of electricity daily and were paying around N68/kWh before this recent government directive as issued by NERC.

Musiliu Oseni, the Vice Chairman of NERC, explained in a media briefing in Abuja that the government’s decision to reduce the over N2.9 trillion spent annually on power subsidy compelled them to discontinue the subsidy on electricity.

Oseni disclosed that Band A customers account for 15% of the over 12.82 million registered electricity consumers nationwide, mentioning that some customers in this category have been downgraded.

Revision of Discos Feeders

Regarding the downgrading of Band A customers, Oseni revealed that some were moved to Bands B and C due to inadequate electricity supply provided by power distribution companies in their respective territories.

He mentioned that after deploying technology to evaluate the power supply from the Discos’ feeders for Band A users, they discovered that many feeders previously labeled as Band A were not meeting the service standards, resulting in their immediate downgrading to protect consumers.

Out of over 3,000 Discos feeders, Oseni reported that the commission had reduced the Band A feeders to less than 500 that currently meet the 20-hour service threshold.

According to Oseni, only the 17% of qualified feeders and fewer than 15% of customers would be affected by any approved rate increase for distribution companies.

He added that a supplementary order issued in April 2024 by the commission would increase the rate to N225/kWh for less than 15% of the customer base in NESI.

Affected consumers would now be responsible for paying their power bills in full, as subsidies applicable to Bands B, C, D, and E would no longer apply to them.

Although most Band A customers have the necessary infrastructure for sustained electricity supply, approximately 20% are still without meters, which will now be prioritized by the Discos.

Oseni emphasized that customers in other bands would not be neglected, with the Discos expediting meter installations for Band A customers, given their revised tariff of N225/kWh.

Discussing the impact of subsidies, Oseni highlighted its effect on payments to power generation companies, leading to challenges in settling gas bills and consequently decreasing power generation levels.

He also pointed out the rise in the gas price for power generation as a contributing factor to the tariff increase, particularly affecting Band A customers.

Labor’s Disapproval

The NLC criticized the government’s decision to raise the electricity tariff, denouncing it as insensitive and harsh.

Benson Upah, the NLC’s spokesperson, expressed these sentiments in an interview with one of the correspondents, labeling the government’s move as callous and detrimental to consumers, especially workers and manufacturers.

The Federal Government, according to the Trade Union Congress, is more focused on revenue generation at the expense of its citizens’ well-being and survival.

Expressing his views, TUC’s Deputy President, Tommy Etim, criticized the government for its insensitivity towards the people. He emphasized that the recent hike in electricity tariffs, from N66/kWh to N225/kWh for those receiving 20 hours of power daily, is unacceptable and could spark individual unrest.

Etim highlighted the lack of readiness for 24-hour electricity supply in Nigeria and criticized the government’s actions during these challenging economic times when the cost of living is high, and workers’ salaries remain unchanged.

Members of the organized private sector also reacted to the development, stating that the tariff hike would lead to job losses, increased operational costs, and inflation.

Gabriel Idahosa, the President of the Lagos Chamber of Commerce and Industry, predicted that companies would have to lay off workers to cope with the increased costs.

He mentioned that businesses might have to scale down operations, leading to layoffs and increased product prices in high-demand areas.

Idahosa further explained that many companies are considering part-time, offsite, and temporary employment as a cost-cutting measure.

Meanwhile, Moshood Lawal, the Head of Corporate Affairs at the Small and Medium Enterprises Development Agency, indicated that the tariff hike would result in higher business operation costs.

Lawal mentioned that small businesses are already experiencing high operating costs, and the tariff increase would further raise the prices of commodities.

Francis Meshioye, the President of the Manufacturers Association of Nigeria, described the tariff hike as unpleasant and hinted at issuing a statement regarding the matter.

Dele Kelvin Oye, the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, cautioned that the electricity tariff increase would elevate business operational expenses.

He emphasized the need for a transparent and gradual policy implementation process to minimize the adverse effects on business competitiveness and consumer prices.

The Centre for the Promotion of Private Enterprise also criticized the substantial increase in tariffs, highlighting a major funding and liquidity crisis in the power sector.

The organization stressed the importance of addressing technical and commercial losses in the electricity value chain, along with the malpractice of estimated billing.

Concerns of Economists

Economists, including Segun Ogundare and Prof. Bright Eregha, criticized the timing of the tariff hike, citing its negative impact on the populace and economic imbalance.

Ogundare highlighted the socio-economic hardships faced by the citizens and emphasized the need for government interventions to alleviate economic burdens.

He called for subsidies in various sectors to offset the effects of the tariff increase on the people.

Shadrach Israel from Lotus Beta Analytics warned of more challenges for the impoverished citizens due to the subsidy removal, urging the government to consider alternatives before implementing such decisions.

Additional reports by Oluwakemi Abimbola, Edidiong Ikpoto, Josephine Ogundeji, and Daniel Adaji

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