Electricity Tariffs Will Increase by 25% In December as a Result of the Unified FX Rates - Experts

A circular was passed last Wednesday and it said that all the segments of the Nigerian Forex Market windows be collapsed into a single window. The Central Bank of Nigeria said that this is part of the changes expected to occur in the operations of the forex market. 

These changes suggest that the country has control over the naira by allowing the currency to flow freely. This means that the government will allow the exchange rates to be solely determined by the market forces and the CBN has no influence on the value of the exchange rate.

However, the cost of electricity consumption is expected to experience an increment after the recent decision of the federal government to unify the exchange rates of the naira into a single window. 

There are upsides and downsides to every policy meted out by the government but in this particular discourse, the implication of the unified FX rates of electricity tariffs will be reviewed.

The Unified Rates and Possible Implications on Electricity Tariffs

Experts on electricity matters tell electricity consumers that an increment in electricity prices should be expected in December.  The circulated message implies that the Multi-Year Tariff Order (MYTO) 2022 had set the exchange rate at N441/$1, which may now be adjusted to about N650/$1, which is the current rate now. 

But an industry expert said NERC reviews electricity tariffs between June and December. She explained that the review usually done in June usually reflects in July while the one done in December may likely reflect in January or February tariffs. It is only after this review is done that a possible adjustment on the new tariff amount will be announced.

Dr Damilola, an energy expert suggests that foreign exchange and the inflation rates are linked. He also explains that although the unification of the exchange rate is beneficial for the economy, it will lead to higher electricity costs for electricity users. 

This exchange rate unification will bring about a significant increment in the electricity tariffs because of the difference between the CBN rate and the new unified rates. Users would have to pay more for prepaid electricity meters under the meters asset provider scheme.

In conclusion, electricity consumers would expect that the power supply in the country is improved greatly to accompany the increment in electricity tariff they are being made to pay. It is pertinent that the energy sector gives a guarantee of reliable power sources to consumers.