The hope of Nigerians to get the recent hike in electricity tariff reversed was dashed yesterday as the Minister of Works, Power and Housing, Babatunde Fashola and the Acting Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Anthony Akah, said the increment had become irreversible.
Fashola and Akah, who spoke at the opening of a two-day public hearing on a motion, “Electricity Tariff Hike in Nigeria,” organised by the Senate Joint Committee on Labour and Power, explained that the commission was constrained by the Act establishing it from reversing the new tariff. The Senate had, after debating the motion in February, which was moved by the Chairman, Senate Committee on Labour, Employment and Productivity, Senator Suleiman Nazif, mandated the Joint Committee to investigate the circumstances leading to the hike.
The Senate also mandated the regulatory commission to reverse the tariff pending the outcome of the public hearing, a directive that was never honoured by the NERC. Explaining his refusal to comply with the directive, the NERC boss told the joint committee that obeying such directive would have created series of avoidable setbacks in the sector.
According to him, reversing the hike would have created a market gap of about N575 billion, which would have compounded the initial market gap of N187 billion the takeoff tariff slammed on investors.
Moreover, he noted that six generating companies (GENCOs), had before the Senate’s resolution, taken NERC to court over the tariff hike and that they could not do final order on reversal of the tariff since the process that led to it was in compliance with section 76 (8) of the Act guiding the operations of the commission. Fashola, however, supported the submissions of the NERC acting chairman, saying that the sector needed the market reflective tariff to survive. He said lots of indices led to the hike, like borrowing rate for investors, exchange rate availability and cost of gas, among others.
“One of the reasons why the tariff has to go up was that a major component, a significant number of our power plant depends on gas; out of about 26 power plants that we have, only about three are hydro. “We were heavily dependent on gas, people were exporting gas because gas was selling outside the country at $4 and it was selling for domestic use at $1.30.
Government reviewed that price to $3.30 and it is the primary component for manufacturing. Power has come up; it should make sense unless government decides to subsidise it,” he said.
According to the Minister, even with the recent hike in electricity tariff, Nigeria still ranks among countries with low tariffs in Africa and by extension, the world. He told the lawmakers that since 2005, when power privatisation process started till 2013, when the major generating (GENCOs) and Distribution (DISCOs) were handed over to investors, every segment of government was involved, and that if there was any failure now, it should be for all and not a particular group.