Nigeria’s power companies are set to increase electricity tariffs, raising them to N200 ($0.15) per kilowatt-hour from the current N68, as reported by Bloomberg news agency.
News About Nigeria reports that this anticipated surge is expected to impact approximately 15% of the population, which consumes 40% of the nation’s electricity.
Recall that on Monday, the Federal Government, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), announced a new price for natural gas for power generation companies.
The agency unveiled the new domestic base price and wholesale prices of natural gas for 2024, raising them to $2.42 per metric million British thermal units from the previous rate of $2.18 mmbtu. It also pegged the cost of commercial gas at $2.92 mmbtu, up from the previous cost of $2.5 mmbtu.
The rise in gas prices is set to trigger a corresponding increase in electricity costs.
The decision to nearly triple the tariffs in a matter of weeks is part of Nigeria’s broader strategy to attract new investment into the energy sector and reduce the substantial $2.3 billion annual expenditure on electricity subsidies.
Sources close to the presidency, familiar with the developments, revealed that these measures aim to enhance the financial sustainability of the energy market and make it more attractive to investors.
Since the privatisation of its generation and distribution sectors in 2013, Nigeria has regulated electricity tariffs through the Nigeria Electricity Regulatory Commission (NERC).
However, power firms have struggled to charge enough to cover the cost of distributing electricity, leading the government to bridge the gap with subsidies.
The government has acknowledged that electricity companies face a significant capital shortfall of an estimated two trillion naira and require new investors to revitalise the industry.
Bayo Onanuga, a spokesman for the presidency, said, “The regulator (NERC) will make a pronouncement based on its discussion with the distribution and generating companies. The presidency cannot say anything at this stage. The electricity sector is hurting,” as quoted by Bloomberg.
