Nigerians’ electricity bills will be cut by as much as half after the regulator said on Tuesday it banned distribution companies from charging consumers for losses caused by billing mistakes.
President Goodluck Jonathan, who is standing for re-election in a postponed vote scheduled for March 28, pledged to improve Nigeria’s chronically unreliable power supply in his administration’s current term in office. South Africa, with a third of Nigeria’s population, has eight times more installed capacity.
“Removing the collection losses will lead to lower tariffs for consumers,” Sam Amadi, chairman of the Nigerian Electricity Regulatory Commission, said in a statement posted on the Abuja-based agency’s website. “The removal of collection losses from customer tariff has reduced tariff by more than 50 percent in some places.”
Peak electricity output in Nigeria, Africa’s biggest economy, reaches about 3,800 megawatts, with another 1,500 megawatts unavailable because of gas shortages, the NERC said this month.
“While the move will be welcomed by many, low levels of electrification in Nigeria will limit its economic impact,” John Ashbourne, an Africa economist at Capital Economics in London, said in an e-mailed note on Wednesday. “Fewer than half of Nigerians have access to electricity, and spending on power tariffs makes up a tiny fraction of consumer spending.”
In 2013, Nigeria broke up the state electricity monopoly and sold power utilities to companies including Korea Electric Power Corp., and Siemens AG, in an effort to bring in much-needed investment. In September, authorities set up a $1 billion bailout fund to help generation and distribution companies pay off gas-supply debts. They also raised the price of gas supplied to power stations in order to encourage more gas to flow into the system.
The move to cut electricity bills “will be a boost to both consumers and commercial users, and has been conveniently announced only 10 days before President Goodluck Jonathan faces a close re-election battle,” Ashbourne said.