The Federal Government through the Nigerian Electricity Regulatory Commission (NERC) has again approved an increase in electricity tariff across the country.
Recall that the electricity distribution companies (DisCos) began implementation of a service-based reflective tariff (SRT) structure nationwide in November 2020.
Although several Nigerians kicked against the hike, President Muhammadu Buhari approved its implementation.
The details of the new increase were disclosed in a directive issued on December 31, 2020, and signed by NERC chairman, Sanusi Garba.
According to the directive, the new tariff took effect January 1, 2020.
The NERC noted that the new tariff would be enforced until the issuance of another minor review order or an extraordinary tariff review order by the commission.
The commission also disclosed that some of the indices considered for the upward review include Nigeria’s inflation rate, exchange rate, US rate of inflation, available generation capacity, gas price, MDA losses and capex adjustment.
This order supersedes ORDER/NERC/ 202B/2020 and shall take effect from January 1, 2021, and shall cease to have effect on the issuance of a new minor review order or an extraordinary tariff review order by the Nigerian Electricity Regulatory Commission (‘NERC’ or the ‘commission’),” the directive read.
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“The actual average monthly inflation rate of 13.1% for the period January to November 2020 was used for review of the year 2020 tariffs, while, the November 2020 inflation rate of 14.9% as obtained from the NBS was adopted to project Nigerian inflation rates for the year 2021 and beyond.
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“In line with the MYTO Methodology, the CBN official exchange rates plus a premium of 1% were used for the retroactive review of the year 2020. Accordingly, average NGN/USD exchange rate (+1%) for the period 1st January 2020 to December 15, 2020, of N360.8 was used to review the year 2020 tariffs. The NAFEX closing NGN/USD exchange rate (+1%) of N397.44 as at December 29, 2020, was adopted to project NGN/USD exchange rate for 2021 and beyond
“The year 2020 projection on available generation is maintained for the first half (Jan-Jun) of 2021 to account for the impact of the delay in the implementation of MYTO-2020. No change was applied to generation projections from July 2021 and beyond.
“A benchmark gas price of $2.50/MMBTU, gas transportation cost of $0.80/MMBTU and gas prices outside the regulated rates for GenCos with effective gas sale agreements (‘GSAs’) were maintained.”
Recall that the electricity distribution companies (DisCos) began implementation of a service-based reflective tariff (SRT) structure nationwide in November 2020. The move came after they received approval from President Muhammadu Buhari.
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