Covid-19: Why electricity tariff hike now?

SAMSON BENJAMIN in this report examines the proposed increment in electricity tariff from July 1, this year, amidst poor power supply and the ravaging Covid-19 pandemic. 

New tariff regime

The federal government told the Senate on Tuesday last week that the new increment on electricity tariff would take off in the month of July. Speaking when he appeared before the Senate investigative hearing on power sector recovery plan and the impact of coronavirus, the Minister of Power, Engr. Sale Mamman, also said massive infrastructure deficit existing within the electricity value-chain was responsible for why the sector has failed to achieve its set goals or objectives.

Engr. Mamman appeared before the Senator Gabriel Suswam-led Committee on Power that is carrying out an investigation with a view to identifying the reasons for unstable and inadequate electricity supply in spite of the huge financial interventions by the federal government.

The minister, who told the committee that the outbreak of the Covid-19 pandemic has affected the purchasing power of consumers, payment capability of electricity consumers as well as the demand for electricity in general, said a lot of capital investment in the sector was dependent on donor funding, loans and budgetary allocation.

He said, “The Covid-19 pandemic, has had a great economic impact – not just on the health sector, but the overall economy of the country. Indeed, the prevalence of the pandemic has already reduced productivity due to the strategy adopted globally to contain it. This by default affects the purchasing power of consumers and the demand for electricity in general.

“The current situation in the Nigerian Power Sector is that in which a lot of capital investment is being made, most of which is dependent on donor funding, loans and budgetary allocation.

 “The impact of the Covid-19 pandemic has also affected our laid out plan for the repositioning of the electricity market towards financial sustainability under the Power Sector Recovery Programme (PSRP). Initially, the regulator, following the completion of public consultation on tariff review, planned on conducting a tariff review in April 2020. However, due to Covid-19 and customer apathy, the proposed tariff review was delayed by three months. The impact of this means the subsidy being incurred in maintaining the current tariff level had to be maintained till July 2020 when the proposed tariff review will be implemented.”

DisCos contact customers

Meanwhile, Blueprint Weekend’s findings revealed that some Electricity Distribution Companies (DisCos) are writing to inform customers that tariff will go up from July 1, 2020 following approval from the regulator and the Government.

Chijioke Omeje, a customer of Enugu Electricity Distribution Company (EEDC), in a chat with this reporter via Whatsapp, said he received a notice of increment of tariff effective July 1, 2020, from EEDC.

The notice seen by Blueprint Weekend reads in part: “Following the directive of the Nigerian Electrical Regulatory Commission (NERC), with the approval of the Federal Government, on the planned electricity tariff review which will take effect on July 1, 2020, the Enugu Electricity Distribution Company (EEDC) wishes to notify her esteemed customers of this development.”

Blueprint Weekend gathered through inquiries that other DisCos are preparing to release similar notices to their customers.

An expert’s view

Speaking with Blueprint Weekend, Timi Olubiyi, an investment expert and chartered member of the Chartered Institute for Securities & Investment, said the increment is a welcome development if it would come with constant power supply.

He said, “The anticipated increase in the electricity tariff regime will be a welcome idea if it will come with improved supply and availability. Because the first challenge is the non-availability of the electricity for use; therefore, it is hoped that the increase will come with availability.

“More so, discussions with some Small and Medium Scale Enterprises (SME) operators indicate that they do not have issues with tariff reviews but the availability. Therefore, before the new tariff regime, the level of generation should be increased so that availability can be guaranteed. Presently the power demand in Nigeria far outstrips the supply and the supply is epileptic.

 “Most of the SME operators currently use generating sets with associated high cost. It is believed that even with the anticipated hike in tariff coupled with the recently increased VAT to 7.5 percent, the cost of running a business in Nigeria will still be lower with access to a steady supply of electricity from the distribution companies.

“Compared to the existing investment in generating sets, fuel, and cost of maintenance which usually impacts negatively on operational cost and performance, the quality and quantity of electricity supply will determine the ability of these numerous SMEs to create a competitive enterprise with the increase in tariff.”

CSOs kick

However, civil society organisations (CSOs) have said no to tariff hike, pointing to poor services, which have no justification for the July increment.

The executive director, SERAP, Adetokunbo Mumuni, said, “Until Nigerians start seeing electricity directly and repeatedly there is no basis to say there will be an increment in the tariff of electricity, to be talking about an increase of electricity tariff without Nigerians properly served electricity and will not be in the interest of the Nigerian people.

 “What they are doing now is putting the cart before the horse because services have to come and they are stable before you can be talking about the increase in charges and not poor service. Nigerians should demand improved services and not accept tariff hike with poor services.”

He said further that, “There should be a forensic investigation of all that has happened in terms of provision of electricity for Nigerians so that those who have culpability should be brought to justice. Let the investigation start in 1999.

“If we take it from this recent democracy we have spent 20 years on, remember, Obasanjo spent so much on electricity that we cannot see electricity; so, various governments have spent so much money.

“A thorough investigation of all that happened must be done so that whoever is found culpable would be brought to justice.

“On carrying out a forensic audit it should be in line with Buhari’s duty to do it because he is the one that said he is interested in fighting corruption since he said he has integrity and what he has we ask him to supply to Nigerians.

“I think Nigerians should find a way of taking steps to oppose this proposed increment because it doesn’t make any sense at all and absolutely.

“When services are okay Nigerians are ready to pay for lovely services and that I am sure that Nigerians are capable of doing, but without improved services to me is dangerous.”

Similarly, in a reaction, the country director, ActionAid Nigeria, Ene Obi, said, “At a point when even the federal government lowered the pump price of fuel because of what is going on in the market, why would the electricity companies want Nigerians to pay more?

“I call on the Electricity Regulatory Commission to quickly call them to order. What reasons are they given to ask Nigerians to pay more? With metered points, Nigerians are happy to pay for services rendered. Electricity is a life wire of industrialisation, we are not happy that the federal government privatized it, if they are not satisfied, the government should take back the system and re-energise it to create employment and expand the process.”

She added: “Very unique is the introduction of solar power, this will shock power companies when Nigerians really know how to use them because we have sunlight all year round.

“Covid-19 is enough struggles that people are trying to find their feet. Citizens have enough burdens right now. I call on Nigerians to reject any increase and demand for efficiency in the power supply. We must remain united against further exploitation by the system.”

‘Wrong timing’

In another reaction, the executive director, YIAGA AFRICA, Samson Itodo, said, “It’s not the right time to implement this new tariff given the present circumstances. It will subject Nigerians to the worst suffering. The implementation should be delayed until we are out of woods. The government should consider this a palliative.”

Also, the executive director of the Africa Network for Environment and Economic Justice (ANEEJ), Rev. David Ugolor, on his part, said, “It is inappropriate for the federal government to nurse the idea of increasing the electricity tariff at this point in time when Covid-19 pandemic has increased the poverty across the country. Millions of Nigerians are going through difficult times and it will be insensitive for any government to ignore the plight of the people and beginning to consider increasing a service that is not even available.

“Around the world government is implementing palliative to address the negative effects of the Covid-19 pandemic and Nigeria should not be an exception. Access to electricity will help the poor to reduce the Covid-19 challenge and also aid the economy.

“The federal government should look for creative ways to stimulate the economy rather than following the old International Monetary Fund, IMF, a prescription that will increase economic hardship. The neoliberal framework will not solve the Nigeria economy problem. We need to be pragmatic and look inward to address the Post-Covid-19 agenda.”

Continuing, he said, “The federal and state governments should explore the options of reducing the cost of governance. The savings from such actions will be used to invest in strengthening the economy and jobs will be available for the people. When the economy functions very well people will be able to pay their bills.

“My humble advice to the president is that he should not allow the IMF Policy guide the way out of the present crisis and we should look for innovative solutions using recovered ‘stolen assets to finance social investment programme’ that will benefit the poor.”

 Consumers’ agony

Similarly, some consumers who spoke with Blueprint Weekend in Abuja decried the proposed hike in electricity billings. They described the move as insensitive to the plight of people who were still grappling with the distorted livelihoods occasioned by the ravaging coronavirus pandemic.

One of them, Mr. Joseph Ogu, who is the director, Joe Tech Engineering and Construction Ltd., a welding outfit, said the hike would further increase overhead cost of production and exert economic pressure on people.

According to him, hiking the tariff this time will reduce job intake as the cost of production will increase resulting in some hired workers being dropped as overhead increases.

“The economy and people are still trying to come out of the coronavirus pandemic; anything in that direction now will portray government in bad light.

“Though the energy sector is being run by private companies, people do not know this and will still look in the direction of the state for solutions and will cast aspersions on the state for any ill-treatment from the sector,” he said.

Ogu, therefore, appealed to the electricity companies to put the plan on hold to allow Nigerians recover from coronavirus pandemic that had made life difficult for people these past three months.

Mr. Anthony Ibezim, a bottled water producer, said people were looking forward to the two months non-payment of electricity bill mulled by government as part of the palliative for coronavirus pandemic.

 “So many people are finding it difficult to pay the current charges and here we are, talking of an upward review. This is some of the things that alienate the people from their governments that give rise to citizens disregarding the state.

“It is appalling for the state to keep churning out policies that will see people in despair,” he said.

According to Ibezim, his electricity bill in the water factory was in the region of N65,000 monthly, which he struggles to pay in addition to other running costs. He said with the planned increment, he might pay up to N100, 000 per month, adding that for him to cope, he might lay off some staff and also increase the unit price of the commodity.

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