Stakeholders indicated that electricity tariffs are set to undergo a significant increase of over 40% starting from July 1. This impending hike in tariffs may signal the end of energy subsidies in Nigeria, potentially leading to more challenging times for the population.
Currently, there is a monthly subsidy of approximately N50 billion in the electricity sector due to a revenue shortfall. As the tariff increase approaches, it will serve as another crucial test for President Bola Ahmed Tinubu's administration, which has been focused on market reforms.
The administration has already eliminated subsidies on Premium Motor Spirit (PMS) and allowed the naira to float freely. These decisions have added complexity to the determination of prices under the Nigerian Electricity Regulatory Commission's (NERC) 2022 Multi-Year Tariff Order (MYTO).
Despite the power sector players' inability to meet the target of supplying a minimum of 5,000 megawatts annually as stipulated in their contracts with NERC, the current Service Based Tariff implemented by NERC was established using an exchange rate of N441/$ and an inflation rate of 16.97%.
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