THE Nigerian Electricity Regulatory Commission (NERC) is set to raise electricity tariff across the country by the end of October. The commission said the increase is to introduce a cost reflective tariff.
With increase in the cost of gas, depreciation of the naira and rising inflation, industry operators have been asking the commission to increase tariff to reflect the new operating environment. The Multi Year Tariff Order (MYTO), on which the Nigerian electricity tariff system is based, has been amended in the recent past and continues to face implementation challenges. The Nigeria Senate directed the NERC to abolish fixed charges in August, a move that further decreased income to power companies despite improving electricity supply.
The new tariff, expected to take effect before the end of October, will factor in a new gas price of $2.5/mmBtu and transportation cost of 80 cents/mmBtu. Other variables for ratification by the commission include market-reflective exchange rate and adjustment factors for the increasing inflation. Given the continue rise in cost of doing business in Nigeria prompted by increasing inflation, high interest rate environment and lacklustre economic conditions, analysts anticipate another tariff increase before the end of the year or in the first quarter of 2016.