Electricity tariff hike overshadows Eid joy
Eid is traditionally a time for reflection, celebration and an opportunity for people to revel in their successes. As part of humans’ basic needs, electricity is needed during this period for all sorts of activities. I anticipated that the government knew the essence of Eid and would use the opportunity to manage expectations about the […]
An electricity substation
Eid is traditionally a time for reflection, celebration and an opportunity for people to revel in their successes. As part of humans’ basic needs, electricity is needed during this period for all sorts of activities. I anticipated that the government knew the essence of Eid and would use the opportunity to manage expectations about the state of the economy. But instead of making an effort to provide the basic needs for the vast majority during the Eid festivities, they decided to announce an electricity tariff increase. This shows a lack of empathy towards the people given the tough situation the country is in. This fresh burden of increased electricity prices only adds to their hardship.
In a country where a large part of the population is poor and miserable, it is demoralising to see people struggling to celebrate festive periods with no happiness and optimism.
Last Thursday, during a dinner in Aso Rock with members of the business community, President Bola Tinubu used flowery words to suggest that the economy was improving in an attempt to assert optimism. Although his projections were evident in the last few weeks, especially as the CBN reacted positively by stabilising the naira’s value and supplying dollars into the financial system, the activity needs to continue until the volatility of the forex market is reduced. The CBN Governor, Olayemi Cardoso, also donated 2.15 million bags of fertiliser to the Ministry of Agriculture. It is a welcome effort given the rise in food prices by over 37.92 per cent from last year.
However, it is unlikely the fertiliser will reach the final users for this farming season. So, food will likely remain expensive.
And instead of maintaining the status quo – price stability policies – the government decided to increase electricity prices by 300 per cent for Band A consumers – these are people who get 20 hours of supply per day. They know that raising the price of electricity affects the cost of production, which the producers pass on to the final consumers. Prices are already rising further in response to the announcement. Let’s not forget that February’s headline inflation sat at 31.70 per cent. The hike is likely to have a ripple effect on the entire economy, further distressing the already burdened citizens.
Thirty per cent of the over 24 million registered Small and Medium Enterprises (SMEs) in Nigeria closed down last year, according to the Nigerian Association of Small-Scale Industrialists.
Like many Nigerians, I was in awe when the Minister of Power, Adebayo Adelabu, appeared on a national TV to lecture people about how to manage their energy consumption by switching off their freezers. It was unjust of him to accuse a population that barely gets supply of electricity of wasting it because the price is low. Yes, the price is indeed low, and it should not be increased as a punitive measure for consumption. Besides, research from May, 2023, shows that there are over 100 countries in the world that offer cheaper electricity than Nigeria.
In a country where over half of the population lacks access to electricity – a fundamental need for economic development, growth and quality life – it would have been better if the administration looked at increasing the supply of power generation instead of attempting to slow down the demand for electricity. They could argue that the administration needs more revenue from the sector, but insight shows that increasing tariffs is counterproductive. An alternative way to increase revenue is to boost the production of power. The sale of electricity will raise revenue as higher volumes increase earnings.
Nigeria’s abundant energy reserves, particularly in gas, hydro and solar, present an opportunity for electricity generation. The theoretical capacity to produce around 14,000MW from the current facilities is a promising figure, but the reality of generating about 4,000MW falls far short of meeting the needs of its vast population.
According to the National Oil Spill Detection and Response Agency (NOSDRA), oil companies in Nigeria flared gas worth over $1bn between January, 2022, and August, 2023. This unutilised gas had the capacity to produce electricity that would meet our local consumption at affordable prices and even export to neighbouring countries.
So, instead of conditioning consumption, the minister should focus on the untapped potential to raise revenue while also mitigating environmental disasters.
Similarly, research shows that the cost of electricity in Nigeria for the most competitive technologies – large-scale hydro-power and natural gas, combined cycle turbines – ranges from $0.05 to $0.07 per kWh. This shows that with strategic investments in the areas, Nigeria can significantly enhance its cost-efficiency in electricity production.
Therefore, raising electricity tariff by any amount is unnecessary given the cost of production and the state of the economy. It is more inappropriate to do so during festivities.
As we celebrate the first Eid al-Fitr under Tinubu’s administration, the ninth of the APC government, we will have to reflect and start asking that rhetorical question: “Are we better off?”