Nigerians are expected to pay more for electricity supply come July 2023.
This is not unconnected with President Bola Tinubu’s declaration two weeks ago about end of subsidy at his inaugural speech.
Energy Frontier believes that the increase would eventually lead to the end of all forms of energy subsidy in the country.
According to The Guardian, with a monthly subsidy of about N50 billion still in the electricity sector owing to revenue shortfall, the tariff hike due from July 1, may be another acid test for the President Bola Ahmed Tinubu administration’s market reform.
The administration has already removed subsidies on Premium Motor Spirit, PMS, and floated the naira, decisions that have complicated the price-setting of the Nigerian Electricity Regulatory Commission, NERC, 2022 Multi-Year Tariff Order, MYTO.
Although the power sector players have been unable to meet the threshold of supplying at least 5,000 megawatts a year after signing contracts with NERC, NERC’s current Service Based Tariff, SBT, was benchmarked on an exchange rate of N441/$ and inflation of 16.97%.
While NERC’s projected tariff for July 2023 was expected to remove subsidy and increase the previously frozen tariff band D and E, increasing the bands from N54.59/kilowatt to N62.16 for band D and N48.37/kilowatt to N61.16 on average with an average increase across the bands moving to N67/kilowatt, the prevailing floating of the naira and spike in inflation is projected to move the new average tariff to about N88/kilowatt for the sector to recover the cost.