The newly implemented hike in electricity tariffs by the Nigerian Electricity Regulatory Commission (NERC) has significantly impacted urban areas in Lagos, Nigeria’s commercial capital. The revised rates, which see a drastic increase from N68 to N225 per kilowatt-hour for Band A consumers—those who experience a supply of at least 20 hours per day—have sparked widespread concern among various stakeholders. These groups, including manufacturers, organized labor, and energy experts, are raising alarms about the potential negative economic consequences, including the possibility of food inflation, business closures, and loss of jobs.
The tariff adjustment, which was announced recently, has seen a dramatic 200% rise for the affected Band A customers. However, NERC clarified that this hike will only affect 15% of the nation’s electricity users, leaving the remaining 85% largely unaffected. As of late 2023, Nigeria had approximately 12.12 million electricity customers, of which 5.61 million had meters, while 5.83 million were on estimated billing systems.
Musiliu Oseni, Vice Chairman of NERC’s Market Competition Rate, emphasized that the increase would only apply to Band A consumers. He reassured the public that customers in Bands B to E would not experience any tariff hikes. Furthermore, he explained that the tariff review aligns with the government’s broader strategy to reduce electricity subsidies by about N1.14 trillion in the 2024 fiscal year. The initiative also aims to streamline the subsidy regime and foster private investment in the power sector.
The specific areas most affected by the tariff increase, according to NERC’s consumption statistics, include various high-demand business units in Lagos. For example, the Abule-Egba Business Unit in Alimosho Local Government, powered by the 33-Ota TCN-AMJE line, consumes up to 998 kilowatt-hours (kWh) daily, while other locations such as Ijaiye and Akowonjo show similarly high consumption rates, reflecting the intensity of electricity use in these urban areas.
Manufacturers have expressed their concerns about the drastic rise in electricity costs, which could further drive up production expenses. The spike in power rates will likely lead to increased prices for goods and services, making it more difficult for Nigerian businesses to compete both locally and internationally. This could worsen inflationary pressures and potentially lead to higher unemployment rates as companies struggle to cope with the added financial burden.
Benson Upah, the spokesperson for the Nigeria Labour Congress (NLC), criticized the tariff hike, calling it “insensitive” and “cruel.” He warned that the move could deepen poverty, particularly for workers whose wages are fixed and insufficient to keep up with the rising costs of living. He argued that the beneficiaries of this hike would be international financial institutions like the World Bank and the International Monetary Fund (IMF), rather than ordinary Nigerians.
Dr. Muda Yusuf, former Director General of the Lagos Chamber of Commerce and Industry (LCCI) and CEO of the Center for Promotion of Private Enterprise, also weighed in, describing the increase as discriminatory. He noted that the policy represents a form of cross-subsidization, where the affluent are expected to pay more to subsidize lower rates for the poorer population. He urged the federal government to continue supporting the power sector, stressing that the private sector alone should not be responsible for funding the energy industry.
Meanwhile, Oseni defended the tariff increase, arguing that the new rates would be more affordable than relying on alternative power sources, which are often more costly for consumers. He suggested that the move would ultimately attract more investment into the Nigerian power sector, benefiting both consumers and the broader economy.
Energy expert Professor Yemi Oke, a Professor of Energy and Electricity Law, also shared his perspective, calling for a restructuring of the power sector. He warned that the current system of subsidies was unsustainable and could negatively affect the nation’s economy. Oke advocated for direct consumer subsidies instead of production subsidies, as the latter could lead to wastefulness and increased costs. He also highlighted the need to fully operationalize the Power Consumer Assistance Fund (PCAF) to support low-income households that are unable to afford electricity tariff hikes.
