The Real Price of Electricity In Nigeria

Over the last few years there has been a lot of blame shifting among the generating companies, the Transmission Company of Nigeria, and the distribution companies as to who is disrupting the flow of electricity to end users. Ultimately, the alibi is usually lack of investment capital to expand because Nigerians pay very low tariff for electricity.

That begs the question: are Nigerians really paying too little for electricity? Prior to the unbundling and privatization of the Power Holding Company of Nigeria to private investors, electricity tariff in Nigeria was among the lowest in the world, 4.3 cents per kilowatt hour. As of June, in 2015, Nigerians were paying N12 per kilowatt hour. That progressed to the charge of N32 per kilowatt hour. By global standard, before the devaluation of the naira in 2016, N12.00 was worth 17 cents. Seventeen cents per kilowatt hour of electricity was a little above global average.

Granted, the value of the naira has fallen since then, the current average tariff for electricity is N62.00.

That is the equivalent of 16 cents per kilowatt hour of electricity, not nearly the lowest in the world

According to Statista.com, a global statistics platform, the Danes and Germans pay the highest tariff per kilowatt hour in the world for electricity, 34 and 33 cents respectively. That is followed by Belgium (28 cents), Italy (27 cents) Portugal (26 cents). In the middle are Finland and Poland with 17 and 16 cents respectively. Indonesians, South Africans, Indians and Chinese pay 10 cents, 9 cents, and 8 cents apiece for electricity per kilowatt hour.

Current tariff prices for electricity in the USA range between 9.37 cents per kilowatt hour in Louisiana to 33.3 cents per kilowatt hour in Hawaii.

In terms of purchasing power parity, N62.00 is worth about 16 cents, which may imply that what Nigerians pay is just around the lower middle of the global tariff pyramid. Americans pay 13 cents per kilowatt hour on average. Argentines pay 1 cent. The above comparison is limited to customers that are metered in Nigeria.

What about unmetered customers? The charge on them may be described as a black hole in the name of estimated billing. It is pertinent to note that almost 5 million households, more than 50 percent of electricity consumers in Nigeria are not metered. Hence the distribution companies charge whatever they please, in most cases, far more than what is charged in Germany that pays 33 cents per kilowatt hour of electricity.

According to the definition of the Nigerian Electricity Regulatory Commission (NERC), estimated billing is when a meter fails to read and the customer is billed based on history of consumption. That is a far cry from the practice of the DisCos, who simply earmark what they want from an area and distribute figures to Nigeria’s almost 60 percent unmetered consumers. So, there are countless instances where there are two apartments situated side by side, consuming roughly the same quantum of electricity, and the metered customer pays N3,000 per month, whereas the unmetered customer pays N20,000 per month, whether there is power of not. In essence, Nigeria’s almost 5 million unmetered electricity consumers may in real terms be paying about the highest tariff in the world.

In an interview with Dr. Sam Amadi recently, he acknowledged that the Nigerian consumer may not be paying cost effective tariff but what they are paying unofficially is much more than what they are paying officially because of the high incidence of unmetered customers.

Realistically, if the equalizing effects are pulled, Nigerians may be paying well above average by global standards for electricity.

 

 

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