By Emeka Okoroanyanwu
The Nigerian Electricity Regulatory Commission (NERC) has revised its Multi Year Tariff Order (MYTO) to take effect from July 2020 when an intermediate review of end user tariff would be carried out. The review is expected to achieve full scale cost-reflective tariff by that year.
The Power Sector Recovery Plan (PSRP), according to NERC provides for a gradual transition to cost-reflective tariffs in Nigeria that takes into consideration the less privileged in the society.The Nigerian Electricity Regulatory Commission (NERC) has revised its Multi Year Tariff Order (MYTO) to take effect from July 2020 when an intermediate review of end user tariff would be carried out. The review is expected to achieve full scale cost-reflective tariff by that year.
However, in the interim, the Federal Government (FG), through the PSRP, has committed to fund the revenue gap arising from the difference between cost-reflective tariffs and actual end user charges subject to clearly stated conditions.
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On the average, it is expected that the review of end user allowed tariffs may be up to 30.0 per cent increase in electricity charges by 2020.
According to Proshare, the proposed switch to cost-reflective tariffs is likely to have mixed impact in the market such as increased pressures from higher energy cost for manufacturers across the country.
Most to be affected are perhaps brewers who may not likely be able to fully transfer cost burden on account of aggressive market competition and weak consumer discretionary income.
However, players within the power value chain are likely to be positively impacted by the move. For instance, companies such as Seplat and Transcorp are likely to experience improvement in general operating environment.
On the macro front, there may be renewed inflationary pressures from 2020, with the Housing Water Energy Gas and Other Fuels (HWEGOF) sub-component of CPI likely to drive core inflation higher. Consumer discretionary income is also likely to weaken as higher energy spending erodes real income levels.