The Nigerian Electricity Regulatory Commission (NERC) has reduced the exchange rate for calculating the current electricity tariff for Band A customers by 16.03%, from N1,463.3/$ to N1,277.8 from May to December 2024.
This is revealed in the commission’s Multi Year Tariff order (MYTO) for May to December 2024 released recently.
The NERC MYTO was reviewed following the appreciation of the naira in the foreign exchange market in the last one month.
Backstory
Following statements by various electricity distribution companies on the reduction of electricity tariff for Band A customers on Monday, the NERC finally confirmed the drop, stating that it was due to appreciation of the naira since the last MYTO review earlier in the month of April.
The NERC approved the reduction of electricity tariff for band A customers from N225 per KWh to 206.8/KWh representing a drop of 8.1%.
Earlier in April, the NERC approved an over 200% hike in electricity tariff for band A customers from about N66 per KWh to N225/KWh, with significant changes in the exchange rate for calculation from N919/$ to N1,463, representing an N543.9 increase.
What you should know
Beyond the review of the exchange rate for the new tariff for band A customers, there were slight changes in other parameters used in arriving at the new tariff. For example, Nigeria’s inflation rate was changed to reflect the latest figures of 33.2% up from 31.7% used in the last order.
Also, there were also changes in the end user allowed tariff of N122/KWh in April to N115/KWh in May. For Band B to E customers, the electricity tariff since 2022 have remained the same in line with the Federal Government’s electricity subsidy program.
The strengthening of the naira over the period led to a reduction in the monthly electricity subsidy payment. For example, the monthly electricity subsidy for Ikeja Disco in the April MYTO stood at N18.7 billion. This has reduced to N10.866 billion, according to the new review.
NERC’s review of electricity tariff following the fluctuation in the foreign exchange market throws electricity customers into the same dilemma faced by importers paying customs duty. The Central Bank of Nigeria (CBN) regularly changes the exchange rate for duties collection almost daily, which does not augur well for long-term planning.
