Electricity Tariff Hikes have led to business closures and job losses in Nigeria. MAN and lawmakers criticize NERC for poor consultation, while the government defends the hike to reduce subsidies.

In recent months, Nigeria’s power sector has been embroiled in controversy following an astronomical hike in electricity tariffs. This development, which saw rates surge from N68 to N225 per kilowatt-hour, has sparked widespread concern among businesses and citizens alike.

Economic Ramifications

The Manufacturers Association of Nigeria (MAN) has voiced alarm over the tariff increase’s devastating impact on the manufacturing sector. Senator Ahmed Abdulkadir, representing MAN, highlighted during an investigative hearing that over 300 companies have shut down, leading to 380,000 job losses in just two months. He emphasized that electricity expenses now constitute about 40% of production overheads, making it unsustainable for many businesses to continue operations under the current economic conditions  .

One notable case is a company that once employed 360,000 workers but has reduced its workforce to a mere 5,000 due to the economic strain caused by the tariff hike . Abdulkadir criticized the Nigerian Electricity Regulatory Commission (NERC) for failing to adequately consult consumers before implementing the new rates, a sentiment echoed by many stakeholders.

Government’s Justification

Minister of Power, Mr. Adebayo Adelabu, defended the tariff increase, stating that it was necessary to reduce the electricity subsidy from approximately N3 trillion to N1 trillion. He argued that without this adjustment, the subsidy burden would have been unbearable for the government . Adelabu also noted that the higher tariff for Band A customers, who now receive at least 20 hours of electricity daily, is still cheaper than relying on fuel and diesel for power generation.

However, the move has not been well-received by the public. Speaker Tajudeen Abbas, represented by his Deputy, Hon. Benjamin Kalu, acknowledged the widespread opposition, citing valid fears that the tariff hike would exacerbate existing economic hardships. He pointed out that higher utility bills could lead to increased operational costs for businesses, thereby inflating the prices of goods and services .

Call for Reform

The House of Representatives Joint Committee on Power, Commerce, National Planning, and Delegated Legislation has set up a special committee to investigate the rationale behind NERC’s tariff review. Chairman Hon. Victor Nwokolo noted that many complaints have been received regarding the lack of consultation and the failure to deliver the promised 20 hours of electricity supply .

Conclusion

As Nigeria navigates these turbulent times, the need for a balanced approach to power sector reform becomes evident. Ensuring sustainability while protecting businesses and consumers from economic shocks is crucial. The legislative and executive branches must collaborate to transform the power sector into a model of efficiency and sustainability, as outlined in their agendas.

For Nigeria to move forward, the voices of all stakeholders must be heard, and any decisions made should reflect the realities faced by its citizens and industries. As Hon. Kalu aptly stated, “We are dedicated to providing legislative support to efforts of the Tinubu administration in reforming the power sector by addressing all legal and legislative impediments” .