- Weak naira, rising gas and infrastructure cost supporting hike
- Rise expected by mid-November, may climb 5% for low-end users
Nigeria plans to increase electricity rates by as much as 40 percent for some customers next month as a fall in the value of the naira and rising costs hinder efforts to end daily blackouts in Africa’s largest economy.
“We are working on the numbers and going through the processes,’’ Sam Amadi, chairman of the Nigerian Electricity Regulatory Commission, said in a phone interview late Wednesday from the capital, Abuja. Some bills will increase 5 percent while others will see prices raised as much as 40 percent depending on the power provider and class of customer, he said. The change in rates will take place by mid-November.
Nigeria dismantled its power monopoly and sold 15 state generation and distribution companies in 2013 to private investors in an attempt to end the crippling electricity shortages. Generated output has never risen above 5,000 megawatts, which is about a third of peak demand, while the state-owned transmission system can’t deliver any more than that before it starts breaking down.
Efforts to boost power supply have been hampered by factors including gas supply, foreign exchange and inflation, that have increased the cost of energy and infrastructure for the power companies, Amadi said. “The law provides for periodic price review when the cost profile changes.”
A slump in crude prices in the past year has put pressure on the naira, forcing the Central Bank of Nigeria, which bailed out the power companies last year, to twice devalue the currency since November. The inflation rate climbed to the highest in more than two years in September to 9.4 percent.
The government-set rates have hampered the distribution companies from paying their bills to the power plants. Just before elections in March, the regulator banned them from charging consumers for losses caused by billing mistakes, effectively cutting the tariff by more than half in some areas. This caused most of the distribution utilities to declare force majeure, saying they couldn’t pay for their power supply.
In June, NERC said it will approve higher prices for natural-gas supply to spur deliveries to power plants.
“If the electricity distribution companies have a good tariff they can pay for gas and they are happy to make more investments,” Amadi said. The average electricity tariff for some of the companies is in the region of 27 naira per kilowatt-hour, he said.