Fakoyejo OlalekanStakeholders in the electricity sector have revealed that the cost of electricity will increase in December, as the tariffs will rise by 25-30%.
According to the Director of Energy Markets and Rates Consultants, Damilola Oluwole, soaring inflation and the depreciation of the naira to the dollar will contribute to the increment.
Recall that inflation closed in May 2023 at 22.41%, up from 22.22% in April. According to Oluwole, this will be factored into the new tariffs that will be set in December.
Also, he explained in a Nairametrics report that the tariff is dependent on the average foreign exchange rates of the Central Bank of Nigeria (CBN) in the past six months, which he puts at N467.53/$1, with 1% of premium factored in.
This is N26.05 or a 5.9% increase when compared to the current N441.48/$1 average rate used to set the current electricity tariff rate.
Recall that the CBN rate stated by Oluwole is before the unification of the multiple exchange rates, which has pushed the official dollar rate to N663/$1 in the Investors’ and Exporters’ window, as of 16 June, last week Friday.
Oluwole disclosed that the bi-annual tariff reviews will be done in December 2023, so the hike in foreign exchange rates will not take effect until the last month of this year.
“From FMDQ’s website, the I&E window closed at USD/NGN 663 on Friday 16th June. If we assume that figure is used for December 2023 tariffs and hold all other factors constant, an increase of about 25-30% in average tariffs can be expected for some distribution companies (DisCos),” Oluwole noted.
Also speaking on the forthcoming increment, the Chief Executive Officer of New Hampshire Capital, an electricity consulting company, Odion Omonfoman, said the current methodology being used by the Nigeria Electricity Regulatory Commission (NERC) to determine the tariff is outdated.
He said a new methodology needs to be set by the NERC for the Multi-Year Tariff Order (MYTO) to adjust the tariff, so the end-user tariffs will be affected, which indicates Nigerians will have to pay more.
Omonfoman further stated: “Unfortunately, customers have no idea about the changes to tariffs, and if they are paying, as both the Nigeria Electricity Regulatory Commission (NERC) and DisCos, no longer inform customers about electricity tariff increases or publish the MYTO tariffs anymore.”
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