…FG Suspends New Tariff As Anger Grows Over Poor Services, Declining Living Standards ..Higher Electricity Tariff Will Result in Rise in Production Costs…MAN …Will Further Imperil Our Local Economy, Axe Millions of Jobs…NLC Amidst periodic increases in electricity tariff, many homes and alleys in Nigeria, Africa’s largest economy remain largely in darkness, as anger grows
…FG Suspends New Tariff As Anger Grows Over Poor Services, Declining Living Standards
..Higher Electricity Tariff Will Result in Rise in Production Costs…MAN
…Will Further Imperil Our Local Economy, Axe Millions of Jobs…NLC
Amidst periodic increases in electricity tariff, many homes and alleys in Nigeria, Africa’s largest economy remain largely in darkness, as anger grows over poor services, with the Manufacturers Association of Nigeria (MAN) claiming that manufacturing industries spent N378 billion to generate their own power between 2015-2017, spanning a three-year period.
Although the Federal Government has directed the Nigerian Electricity Regulatory Commission (NERC) to suspend the planned bi-annual adjustment in electricity tariff, topping by 50 per cent which was reeled out on Monday, until the joint ad-hoc Committee concludes their discussion by the end of January, many perceive this as a mere decoy to buy time. The same cynicism rings around government’s deal with Siemens, a German company to raise power generation from the current 5000 megawatts to 7000 megawatts, 11,000 megawatts and 23,000 megawatts at the end of 2021, 2023 and 2025 respectively.
NERC had raised tariff for the Electricity Distribution Companies (DISCOs) in September, 2020 but that drew outrage from customers and the organised labour, prompting the Federal Government to suspend it to pave way for parties to dialogue. Subsequently, by November 1, 2020, the suspended tariff was implemented after some discounts were given for customers who get 12 hours and above power supply daily. Unfortunately the last hike like others before it, has not resulted in lower power outage.
“Since the last increase in tariff in November, power situation has further dipped. We used to enjoy two days on with about 12 hours of electricity and one day off that will leave us with 6 hours of electricity during the day and no power in the night but now supply is eclectic. What is supplied is mostly not strong enough to power the air conditioner to stave off the current intense heat. So all we get from the regular increases in tariff is abysmally poor services,” laments Biola Akintola, a resident in one of the estates in New Okooba, on the outskirts of Agege in Lagos.
A retired Accountant, Olusegun Kayode who lives in Alagbado complains that the cost of fuelling his generator which is equally hitting the roof has become unbearable. “We spend an average of N60,000 monthly to fuel our generator because of lack of power. This is really unbearable for our pocket,” he says.
Warning that any increases in electricity tariff will lead to further rise in production costs, MAN notes that electricity remains a vital input for manufacturing process to the extent that it constitutes up to 40 percent of its cost of production.
Such costs will inevitably be passed on to consumers, with attendant ripple effect in the economy. MAN equally warned that increasing electricity tariff will have drastic negative effect on the Gross National Product (GNP); Gross Domestic Product (GDP), disposable income, consumption, consumer price index, employment, government revenue from corporate taxation, among others.
MAN President, Mansur Ahmed, at the yearly media luncheon in February 2020, advised the Federal Government to concentrate on developing processes and policies to address the nation’s power needs. He said: “It is also important for government to ensure adequate and appropriate consultations with stakeholders in the private sector on such decisions with far-reaching implications.
“Similar to this, is the uneven pricing of this commodity across DisCos, which if not corrected, will lead to uneven development in certain parts of Nigeria, as the percentage increase in tariff differs. A reduction in electricity tariff for industrial purpose is more ideal, but even if it cannot be reduced, it should be not be increased; any increase on the tariff will reinforce the already high cost manufacturing environment and further depress productivity in the sector.”
Minister of Power, Mr Sale Mamman, in a statement on Thursday, explained that the order to suspend the tariff is to ensure that a constructive conclusion is reached between the labour unions and the Federal Government.
“The public is aware that FGN and the Labour Centers have been engaged in positive discussions about the electricity sector through a joint ad-hoc committee led by the Minister of State for Labour and Productivity and Co-Chaired by the Minister of State for Power,” Mamman said.
“Great progress has been made in these deliberations which are set to be concluded at the end of January 2021.
“Some of the achievements of this deliberation with Labour are the accelerated rollout of the National Mass Metering Plan, clampdowns on estimated billing, improved monitoring of the Service-Based Tariff, and the reduction in tariff rates for bands A to C in October 2020 (that were funded by the creative use of taxes).
“It should be clear to all that the regulator must be allowed to perform its function without undue interference. The role of the Government is not to set tariffs, it is to provide policy guidance and an enabling environment for the regulator to protect consumers and for investors to engage directly with consumers. Bi-Annual Minor reviews to adjust factors such as inflation are part of the process for a sustainable and investable NESI.
“To promote a constructive conclusion of the dialogue with the Labour Centers (through the Joint Ad-Hoc Committee), I have directed NERC to forestall the implementation of the duly performed minor review (which adjusted tariffs between N2 per kWh and N4 per kWh) until the conclusion of the Joint Ad Hoc Committee’s work at the end of January 2021.
“This will allow for the outcome of all resolutions from the Committee to be implemented together.”
The Minister stressed that the information by NERC was misinterpreted by the general public and there was a need for the government to speak up and ensure sustainable growth in the electricity market.
“On the contrary, the government continues to fully subsidise 55% of on-grid consumers in bands D and E and maintain the life line tariff for the poor and underprivileged,” Mamman said.
“Those citizens have experienced no changes to tariff rates from what they have paid historically (aside from the recent minor inflation and forex adjustment). Partial subsidies were also applied for bands A, B and C in October 2020. These measures are all aimed at cushioning the effects of the pandemic while providing more targeted interventions for citizens.
“The Administration is committed to creating a sustainable, growing and rules based electricity market for the benefit of all Nigerians.
“The Administration and the Ministry of Power will also continue to devise means to provide support for vulnerable Nigerians while ensuring we have a sustainable NESI,” he explained
.Details of the new increase said to have been endorsed by the government were disclosed in a directive issued on December 31, 2020, and signed by NERC Chairman, Mr Sanusi Garba.
According to the directive, the new tariff took effect January 1, 2020.
The NERC noted that the new tariff would be enforced until the issuance of another minor review order or an extraordinary tariff review order by the commission.
The commission also disclosed that some of the indices considered for the upward review include Nigeria’s inflation rate, exchange rate, US rate of inflation, available generation capacity, gas price, MDA losses and capex adjustment.
“This order supersedes ORDER/NERC/ 202B/2020 and shall take effect from January 1, 2021, and shall cease to have effect on the issuance of a new minor review order or an extraordinary tariff review order by the Nigerian Electricity Regulatory Commission (‘NERC’ or the ‘commission’),” the directive read.
“The actual average monthly inflation rate of 13.1% for the period January to November 2020 was used for review of the year 2020 tariffs, while, the November 2020 inflation rate of 14.9% as obtained from the NBS was adopted to project Nigerian inflation rates for the year 2021 and beyond.
“In line with the MYTO Methodology, the CBN official exchange rates plus a premium of 1% were used for the retroactive review of the year 2020. Accordingly, average NGN/USD exchange rate (+1%) for the period 1st January 2020 to December 15, 2020, of N360.8 was used to review the year 2020 tariffs. The NAFEX closing NGN/USD exchange rate (+1%) of N397.44 as at December 29, 2020, was adopted to project NGN/USD exchange rate for 2021 and beyond.
“The year 2020 projection on available generation is maintained for the first half (Jan-Jun) of 2021 to account for the impact of the delay in the implementation of MYTO-2020. No change was applied to generation projections from July 2021 and beyond.
“A benchmark gas price of $2.50/MMBTU, gas transportation cost of $0.80/MMBTU and gas prices outside the regulated rates for GenCos with effective gas sale agreements (‘GSAs’) were maintained.”
The new tariff hike regime is to be paid by customers of the 11 electricity distribution companies (DISCOs).
We’ve Bled Enough
Decrying the new tariff hike, the Nigerian Labour Congress (NLC), in a statement titled, “Nigerians Have Bled Enough!,” signed by its President, Ayuba Wabba demanded that the increase should be reversed,
“While Nigerians were trying to embrace the warmth of the New Year, the Nigeria Electricity Regulatory Commission (NERC) in its ‘wisdom’ decided to slam the country with the cold hug of yet another astronomical increase in electricity tariff. This increase would be the umpteenth time in a space of less than one year.
“The Nigeria Labour Congress (NLC) vehemently condemns this attempt to start Year 2021 for Nigerians on the grinding stone. It is even colder that this tariff increase was announced without recourse to the negotiation process that the government and Organized Labour in Nigeria signed up to about three months ago.
“The representatives of Organized Labour in the committees set up during negotiation with government to engage on issues in our electricity and petroleum sectors heard of this insensitive hike from the media like other Nigerians. This is indeed a stellar performance in negotiation in bad faith by the Federal Government. This is completely unacceptable to the working people of Nigeria,” he says.
Wabba argues that, “It is very awful and indeed cruel for government to introduce yet another killer electricity tariff amidst the soaring inflation and poverty rates in the country. This hike also comes in the face of the renewed onslaught of COVID-19 where workers and citizens expend their meagre resources on healthcare both for preventive and therapeutic response to the renewed COVID-19 challenge.
“We really fear for the impact of this new increase on manufacturing in Nigeria. Certainly, the producers of “Made-in- Nigeria” goods and services will find it greatly difficult to cope with this new tariff. Before now, many manufacturing concerns and Small to Medium Enterprises were already reeling in great strain as a result of the negative growth occasioned by the first wave of the COVID pandemic in 2020. There is no gainsaying the fact that this tariff hike would sound the death knell for many manufacturing outfits in Nigeria as many of them would resort to either mass lay- off of workers and or direct importation of finished goods.”
“Finally, we are bothered by the double speak in the NERC communique announcing this hike in tariff. In one breath, NERC denied any new increase in tariff. In another breath, it announced that electricity tariff would be adjusted from N2 per kilowatt/hour to N4 per kilowatt/hour – a 100% tariff increase.
“The statement in quick reversals also lumped consumers in Band D and E under the new tariff. This volte face is contrary to our agreement with government which excluded Band D and E from further increases in electricity tariff. This clearly paints a picture of deliberate mission by government to hoodwink and take Nigerians for a ride.
“Overall, this increase in electricity tariff apart from negating the agreement we reached with government in September 2020 will further imperil our local economy, lead to the loss of millions of jobs by Nigerian workers and trigger wider social discomfitures.
“In light of the heightened burden that this hike in electricity tariff imposes on Nigerian workers and people, we urge the Federal Government to quickly withdraw this uncanny New Year Gift or face an unprecedented industrial resistance by Nigerian workers. Nigerians have bled enough already. We will bleed no more!,” the NLC says.
The Human Rights Writers Association of Nigeria (HURIWA) has strongly condemned as “insensitive, irresponsible, irrational and reckless”, what it called “the ill-timed and ill-intentioned” 50% hike in the electricity tariff payable by Nigerians.
It stressed that the 50% hike added to already overcharged and over-billed electricity tariff paid by Nigerians is regrettable and unfortunate.
The rights group expressed fear that the hike in electricity price will unleash a “harmattan of absolute poverty in the midst of the massive poverty” the government had already inflicted on millions Nigerians in the last five years. “There is no country anywhere under the sun,” HURIWA said, “where the government begins a new year for her people with an avalanche of strangulating economic policies as has being done by President Muhammedu Buhari.”
It said that the action by the President is a negation of section 14 (2)(B) of the 1999 constitution which speaks to the issues of primary duties of government as the obligation to promote the welfare and security of the citizens, noting that in this instance, the increment in the electricity tariff has violated the Chapter 2 of the constitution.
“This same government did not transparently provide financial assistance to a large number of small businesses that were destroyed due to the COVID-19 lockdown that were enforced by the President Buhari for eight months.
“And then the same government introduced twin evil policy of hike in patrol price and that of electricity tariff. Millions of Nigerians are still battling to survive the consequences of that twin evil policy only for the government to introduce yet another economic pain on the necks of Nigerians to compound their poverty situation on a very colossal level.
“This is a tragedy of unimaginable proportion and must be resisted by the people of Nigeria or we will be enslaved. Nigerians should therefore reject it or we live with the ugly reality of collective servitude. The best alternative is to publicly demonstrate peacefully to demand immediate withdrawal of this excruciating pain which will further impoverish millions of Nigerians.
“The hike in electricity tariff will have the ripple effect of increasing the costs of goods and services just as the prices of essential foods and other items will quadruple given the costs of preservation of some of the food items that are sold and bought in the same markets by both the affluent and the absolutely poor 100million Nigerians as the country has overtaken India as the poverty capital of the world,” the organisation said