Suspended Service Based Electricity Tariff Returns as FG, Labour Seal New Deal

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Electricity Distribution Companies (DisCos) may resume bill collections this week under the controversial Service-Based Electricity Tariffs (SBT), which was one of the reasons Nigerian workers took to the streets last two months in protest.

Orient Energy Review gathered that the Nigerian Labour Congress (NLC) is said to have secured a deal government last weekend. According to the deal, the federal government and organised labour resolved that the tariffs for certain categories of power consumers should be reviewed downward. While the tariffs for customers in A and B bands were reduced by 10%, the tariff for C band customers was reduced by 30%. For customers in the D and E bands, their tariffs remain frozen, which implies that there is no increment.

At the 51st virtual Power Dialogue organised by Nigeria Electricity Hub in Abuja, Special Adviser on Infrastructure to President Muhammadu Buhari, Mr Ahmad Zakari, confirmed that Labour has accepted the new terms agreed by the two parties, explaining that the collections under the new regimes will commence next week.

According to him, after negotiations with organised labour, all the parties agreed to a reduction of tariffs for certain bands while bands D and E remain frozen and C will continue to be subsidised in the short term to the tune of 30 per cent.

Nigeria’s electricity market faces total collapse if the situation continues as business as usual, the Presidential aide said, adding that the intention of the government is to transit to a market-based regime, where the demand and supply will determine prices.

He added that there will henceforth be more transparency in the collection of electricity revenues by the Distribution Companies (Discos) since it is now being closely monitored by the government. The Value Added Tax (VAT) and other deductions will now be removed from the funds before the rest will be remitted to the Discos.

“Remember that 55 per cent of on-grid consumers are still 100% subsidised. The N31 on average per kilowatt per hours for band D and E were paying before SBT, they will continue to pay. Only 45% of the on-grid population was affected. And with the agreement with labour, we are now going on to take out an additional 30% from band C in terms of what they were supposed to pay.

“That increase will be reduced by 30 per cent and then there will be a 10 per cent reduction in A and B. But I promise you next week on the headlines if we resume service based tariff, what everyone will be saying is that government has increased tariff for everybody and that’s because there’s a vibrant urban population that consumes the headlines. But we are committed to doing the right thing.

“Hard decisions are not always popular. But we are going back to SBT with the reduction agreement that we have with labour and we are going to make this market work. That government/labour agreement was two weeks ago, but the government actually had refused to implement it because it wanted to provide additional palliatives at this difficult time. You can quote me that this was supposed to have taken off two weeks ago,” he said.

“We cannot hold the Disco value chain down but what we can do is to find efficiencies in gas pricing and aggressive loss reduction through metering and long interest financing. What you will find is that over time, prices will come down.

“There’s no way we are going to continue to live in an imaginary world where we think that we can make progress selling a product for less, whereas it costs more. It’s unfortunate the government didn’t take action early and we are at a point right now where it’s no longer sustainable.”

According to him, “What we have done through the banking sector, all the Discos collections are being monitored and we will deduct VAT and taxes for the government and then the loans from the central bank and then pass down the balances to the Discos. There’s full transparency.”

By Chibisi Ohakah, Abuja


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