Sunday November 28, 2021 / 07:00AM / by FDC Ltd / Header Image Credit:  Correct NG

TheFGN is expecting to revise electricity tariffs upwards by December as it stepsup its mass metering initiative. The objective is to bring the market closertowards cost-reflective tariffs which is crucial to the industry'ssustainability and attracting investment flows. The industry has been held backby a lack of investment since its privatization and the absence of cost-reflectivetariffs is a major step in solving the financing constraint that hasbeleaguered the sector.

Thereview is expected to take place in two stages: the Extraordinary Review ofTransmission Company of Nigeria's Loss Factor (TLF) in the MYTO, and the processesfor the December 2021 review of MYTO - 2021. The MYTO review in December 2021will take into account changes in relevant macroeconomic indicators, generationcapacity, and capital investment required for the evacuation and distributionof available generation capacity in accordance with current norms.

Itis likely that the adoption of the Multi-Year Tariff Order (MYTO) would befollowed by resistance from labour. Just like in thecase of subsidies on PMS, labour unions have beenvocal in their resistance to power tariff hikes. They fail to see the directlink between cost-reflective tariffs and increased power supply which wouldlower the use of alternative forms of energy (which cost up to 400% more).

Whilethe tariff hike would be initially inflationary, an improvement in revenue willtackle the challenge of inadequate transmission and distribution infrastructurewhich will boost efficiency. The capacity of the players to meet their debtobligations as well as attract funding is also improved.

Meanwhile, FG commenced the procurement of 4 millionelectrical meters which will be distributed to unmetered power consumers acrossthe country under the National Mass Metering Programme. There are about 8mnunmetered consumers in Nigeria (3.88% of total population). The programme is divided into three phases: phase zero, phaseone, and phase two. It is worthy of note that the mass metering operation isnot entirely free, as the government provided loans for the purchase of thesemeters.

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