Sanitising Nigeria’s power tariff model

The Nigerian Electricity Regulatory Commission has recently announced a downward review of electricity tariffs for Band A customers in the country. The new tariff is set at 206.80 naira per kilowatt-hour, down from the previously approved 225 naira per kilowatt-hour in April. This tariff cut has been attributed to the appreciation of the naira at the official FX window. Oti Ikomi, CEO of Proton Energy, shed some light on the significance of this development in a recent interview on CNBC Africa. Ikomi expressed cautious optimism about the tariff reduction, likening it to a positive trajectory in the nation's electricity services industry. He commended the efforts of the regulator and stakeholders in addressing the challenges faced by consumers. The decrease in the band A tariff by 8 to 10 percent is a welcome change, reflecting a more favorable exchange rate and other contributing factors. The adjustment in tariffs is part of the Multi-Year Tariff Order (MYTO) framework, which includes periodic reviews to ensure cost reflection in the pricing structure. The recent revision was triggered by changes in key factors such as the exchange rate and gas price. Ikomi highlighted the importance of effective metering and consumer engagement in monitoring the quality of service delivery. While the tariff reduction is a positive development, there are lingering challenges in the sector, including last-mile metering issues and stakeholder management. Organized labor has raised concerns about tariff levels and utility costs, calling for a significant increase in monthly wages. Ikomi emphasized the need for collaboration between all parties to address these challenges. In addition to the tariff revision, recent initiatives have been introduced to enhance energy efficiency and grid stability. Measures such as reducing energy supplied to international customers and increasing prices for spinning reserves aim to improve the overall reliability of the electricity grid. These initiatives are essential to prevent grid collapses and ensure a sustainable energy supply. As Nigeria navigates its journey towards cost-reflective tariffs and improved service delivery, cooperation among stakeholders will be vital in overcoming the existing challenges. The path to a more efficient and reliable electricity sector requires continuous dialogue and proactive measures to address the needs of consumers and industry players alike. While there are still obstacles to overcome, the recent tariff adjustment represents a step in the right direction for Nigeria's energy landscape.