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IN January, the Federal Government approved a 50 per cent telecom tariff hike. As Nigerians adjust to that, a government official hinted that the electricity tariff will also see an upward review soon. This is a difficult moment for Nigerians.
Olu Verheijen, President Bola Tinubu’s Special Adviser on Energy, says that after the 2024 Band A tariff increase, electricity tariffs now cover about 65 per cent of the supply cost while the government continues to subsidise the remaining 35 per cent to bridge the gap.
This adds up to N200 billion monthly to subsidise electricity. Verheijen says this amount benefits the wealthiest 25 per cent of Nigerians rather than the poor. It is a blatantly hollow argument.
It will deepen Nigeria’s electricity poverty. According to the World Bank, Nigeria has the world’s largest absolute electricity access deficit. It stands at 90 million persons, or 45 per cent of the population, which lack access to the electricity grid.
This is the same worn-out argument repeated by successive governments to justify the gradual and eventual removal of petrol subsidies.
Nigerians were deceived that the petrol subsidy benefited the rich, but after its total removal, the people suffering the most are the poor.
The number of poor Nigerians has increased, and the middle class has almost been eviscerated by Tinubu’s harsh economic policies. So, the people who suffer the fresh electricity tariff raise are the same people presently struggling hard to feed themselves.
Thus, the plan to raise the electricity tariff is ill-timed and insensitive.
The Manufacturers Association of Nigeria said, “The proposed increase in electricity tariff is inimical to the competitiveness of Nigerian products and businesses as it will further exacerbate the impact of the high cost of production, worsen the current inflationary pressure, aggravate the pressure on the disposable income of the average Nigerian, increase the unsold inventory of manufacturers, erode their profit margin, increase the unemployment rate and lead to the closure of more private businesses.”
Despite the hike, the power companies, especially the distribution companies, are still delivering poor service.
So, there is no reason for the government to continue to sanction an increase in tariffs when there is no corresponding improvement in service.
The transmission system is weak, and the owners of the power distribution companies have not made serious investments in their networks since they bought the DisCos in 2013.
Federal Government officials should not be acting as if the subsidy is bad. No country in the world does not subsidise one thing or the other. Every country chooses what to subsidise depending on the peculiar needs of its economy.
The United States subsidises agriculture, oil and energy, housing, auto industry and healthcare. The UK government subsidises health, technology, housing, education, and electric vehicles.
In December, Nigeria’s inflation hit 34.8 per cent, up from the 22.41 per cent Tinubu inherited from former President Muhammadu Buhari in May 2023.
Inflation, interest, and currency exchange rates are some of the key indices used to assess the health of an economy. Currently, all those indices are negative in the Nigerian context.
One of the fallouts of Tinubu’s economic reforms is soaring inflation that has eroded the purchasing power of most Nigerians amidst rising prices.
With inflation at 34.8 per cent and the likelihood of it rising again, the focus of the government should be on how to reduce inflation rather than piling more burdens on Nigerians.
If the naira appreciates N1,200 to the dollar, there may be no need to raise the electricity tariff because the weak naira contributes heavily to regular price adjustments.
So, working hard to shore up the value of the naira against the dollar will reduce the need for the government to raise tariffs incessantly.
