Nigeria: Electricity, Fuel Users To Pay More As Abuja Under Pressure On Other Critical Sectors

September 25, 2018

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The price regime of electricity and petroleum products in Nigeria will be shooting up most likely, from next year as the Federal Government is under intense pressure to ”fix” some other critical sectors of the country’s economy.

A pointer to this effect is coming from the United States of America.

While Abuja has continued to economical with the truth on the subsidy it pays on imported fuel, though it keeps claiming that it is “under recovery”, the United States Agency for International Development (USAID) has however, warned that fixing critical sectors such as education and health care services will remain a mirage until subsidies on petroleum products and electricity are discontinued.

While the pump price of the premium motor spirit (petrol) is selling at N145 per litre, kerosine is getting out of the reach of the poor with a litre of the commodity selling at more than N200.

As at last May, the country’s daily payment for fuel subsidy rose to N2.4 billion, from N774 million in March this year.

This was revealed in a report by the Petroleum Products Pricing Regulatory Agency (PPPRA). According to the report, without the subsidy, the price of petrol could increased to N205 per litre in the domestic market.

PPPRA revealed that the price of the commodity appreciated by 8.47 per cent from N189 per litre in April 25, to N205 per litre as at May 16.

But the price of petrol is fixed at a maximum of N145 per litre, which indicates that the Nigerian National Petroleum Corporation (NNPC) is currently paying N60 as under recovery for a litre of the commodity.

In the mean time, the Nigerian Electricity Regulatory Commission (NERC) before now had announced new tariffs payable by electricity consumers, indicating increase in charges for different categories of consumers across the country.

NERC, however, abolished the fixed charges and declared that electricity users will only pay for what they consumed.

Minister of Power, Works and Housing, Babatunde Fashola, had hinted that the electricity tariffs will go up, insisting that the sector will record considerable improvement thereafter.

Based on the existing tariff regime, residential consumers (R2) are paying on the average 48 per cent more than what they were paying before as contained in the Multi Year Tariff Order 2.1 for 2015.

Consumers under the Abuja Electricity Distribution Company are paying N29.56 as energy charge, under the Eko Disco it is N28.75, those under Ikeja, Kaduna and Benin Discos, are paying N22.96, N31.71, and N27.72, for a unit of electricity respectively.

Commercial consumers (C2) under the Ibadan and Enugu Discos, are paying N38.87 and N42.4.

According to NERC, residential customer classification (R2) in the Abuja Electricity Distribution Company are no longer paying N702 as fixed charge every month. Their energy charge increased by N9.60.

Also, residential customers (R2) in Eko and Ikeja electricity distribution areas are no longer paying N750 fixed charge. They are getting N10 and N8 increase respectively in their energy charges.

NERC Chairman/Chief Executive Officer, Dr. Sam Amadi, had said, “this is good for electricity consumers who have long asked for a more just and fair pricing of electricity. The regulatory commission had promised to address all the complaints against fixed charges through a regulatory process that promotes investments in the electricity industry without unfairly burdening electricity consumers.

The objective of the new tariffs is to enable prudent consumers to save money on electricity bills as they can control their consumption and not pay monthly fixed charges.

He said the new tariff regime came with renewed commitments by the electricity distribution companies to rapidly improve the quantity and quality of electricity supply. But this is not happening since the existing tariff regime, according to the Discos, is not boosting their business.

The essence of the tariff order was to encourage the Discos to develop new sources of supply within their franchises to increase the quantity and quality of supply to target customers on a willing buyer and willing seller basis.

NERC further pointed out that every Disco should meter all its customers, adding that the metering policy will be strictly enforced. While meter has become an essential commodity for the eager electricity consumers, NERC had declared that no Disco will be allowed to connect new customers without metering them first.

This, it said, was to close the wide metering gap of over 50 per cent and reduce the high incidence of collection losses in the Nigeria electricity supply industry.

However, the USAID Country Mission Director, Stephen Haykin, who represented the US Ambassador to Nigeria, Stuart Symington, made the warning at the 10th Anniversary Colloquium of the Financial NigeriaMagazine in Abuja .

Haykin said the inability of the country to recover the cost of electricity as well as the failure to recover the full cost of production from pump prices of petroleum products meant that critical resources were being diverted instead of being invested in critical needs in education and health care.

“One proximate cause of poor health, education and nutrition standards is low public expenditure. This, in turn, is related to very low public revenues due in fact to low tax rates and weak systems for tax collection. Low social spending is also as a result of transfers from government to petroleum and power sectors, because fuel and electricity tariffs are below cost recovery levels,” he said.

Attributing poor social development to crises across the country, Haykin said, “Fiscal, trade and other micro-economic policies tend to act as breaks on private sector initiatives on economic growth. Weak governance due to inadequate capacities or lacks of checks and balances also slows social and economic development.”

Also speaking at the event, a former Minister of Health, Muhammad Pate, said that about 40 per cent of under-five children in Nigeria were experiencing stunted growth.

Pate, who is currently an adjunct professor of global health at the Duke University, in his keynote presentation noted that the Nigerian political elite were serving themselves rather than the people.

According to him, ”after extracting almost a trillion dollars’ worth of oil since our national independence, we have a situation where poverty is going on. We have effectively squandered an opportunity to utilise the natural resources that we obtain purely by chance, not by hard work.

“Instead of investing to uplift our people’s lives, our political elites by commission or omission choose the path of short-term comfort and purchase of loyalty through economically unwise or corruption riddled national expenditure at the expense of economically sound investments in both human and physical aspects to transform our nation.

“For a country to realise its demographic dividends, it must first undergo demographic transition, which means a shift from high fertility and high child mortality to relatively lower fertility and child mortality.”