Connect with us


Nigerians Brace for Tougher Times: Electricity Tariff Set to Surge by Over 40%

Nigerians Brace for 40% Surge in Electricity Tariff, Tougher Times Ahead
Energy Subsidies on the Verge of Extinction as Nigeria Prepares for Tariff Hike
President Tinubu’s Administration Faces Acid Test with Impending Electricity Tariff Increase



Power - Investors King

Nigeria is bracing itself for a challenging period ahead as the electricity tariff is set to increase by more than 40%, potentially putting an end to all energy subsidies in the country.

With a monthly subsidy of approximately N50 billion still present in the electricity sector due to revenue shortfalls, the tariff hike scheduled for July 1st will be another significant test for President Bola Ahmed Tinubu’s administration’s market reform efforts.

The administration has already eliminated subsidies on Premium Motor Spirit (PMS) and implemented a floating exchange rate for the naira, both of which have complicated the price-setting process of the Nigerian Electricity Regulatory Commission’s (NERC) 2022 Multi-Year Tariff Order (MYTO).

Despite signing contracts with NERC to ensure a supply of at least 5,000 megawatts per year, the power sector players have been unable to meet this target.

In 2015, the average tariff for distribution companies (DisCos) and different customer classes was N25 per kilowatt. However, in the 2020 MYTO, the average tariff rose to N60 per kilowatt, and in the 2022 MYTO, it further increased to N64 per kilowatt across customer classes.

Foreign exchange rates and inflation have played a crucial role in determining the tariffs. The exchange rate used in 2015 was N198.97/$, which increased to N383.80/$ in 2020, and N441.78/$ in 2022. Inflation rates used were 8.3% in 2015, 12% in 2020, and 16.97% in 2022.

Currently, the inflation rate stands at 22.41%, with projections indicating it could reach 30% by the end of June due to the floating of the naira and the removal of PMS subsidies.

Besides inflation, other factors such as the metering gap of over seven million, gas prices, losses, and actual generation capacity also contribute to the determination of tariffs.

While NERC’s projected tariff for July 2023 aimed to remove subsidies and increase the previously frozen tariff bands D and E, the prevailing floating of the naira and rising inflation are expected to push the new average tariff to approximately N88 per kilowatt, allowing the sector to recover its costs.

Stakeholders have expressed concerns over the unavoidable tariff increase and its potential impact on households and small businesses. Energy costs alone are expected to rise by over 70%, placing further strain on purchasing power amidst high unemployment and poverty rates, which form significant challenges for the economy.

As of now, the available electricity on the grid stands at 3,057.7 megawatts from 17 power plants. Over the past four months, the average load intake of all DisCos has been around 3,000 megawatts, falling significantly short of the 100% remittance orders they are required to meet.

The unreliability of the grid and subsequent financial losses have raised concerns among stakeholders about the future of the Nigerian Electricity Supply Market. Consumer apathy towards the system and the increasing reliance on alternative energy sources are compounding the sector’s challenges.

Energy expert, Prof Wunmi Iledare, expressed concerns about the restructuring of the forex market and its potential devaluation of the naira. He emphasized the importance of supporting the government’s efforts to decouple the economy from forex instability, even if it means accepting higher electricity tariffs and petroleum product prices.

Continue Reading


August 2023 Witnesses Highest Revenue Allocation of the Year – N1.1 Trillion Shared

The driving force behind this boost in revenue can be attributed to foreign exchange gains that have contributed significantly to the government’s income stream.



Revenue - Investors King

The Federation Account Allocation Committee (FAAC) unveiled its allocation of N1.1 trillion to the three tiers of government for the month of August 2023, Investors King reports.

This substantial increase was detailed in a communiqué following the committee’s latest meeting. August allocation was the highest so far with an increase of N133.99 billion when compared to the N966.11 billion shared in July 2023.

The driving force behind this boost in revenue can be attributed to foreign exchange gains that have contributed significantly to the government’s income stream.

Breaking down the N1.1 trillion total distributable revenue, the statement reveals that it consists of distributable statutory revenue amounting to N357.4 billion, distributable Value Added Tax revenue totaling N321.94 billion, Electronic Money Transfer Levy revenue at N14.10 billion, Exchange Difference revenue of N229.57 billion, and an augmentation of NN177.09 billion.

Of this impressive sum, the Federal Government is set to receive N431.25 billion, while the State governments will be allocated N361.19 billion, and the local government Councils will obtain N266.54 billion.

However, it’s essential to note that the total revenue available for August stood at N1.48 trillion, marking a 14% or 0.26 trillion decrease from the preceding month’s figure of N1.74 trillion.

The FAAC communiqué further underscores that various deductions were made, including N58.76 billion for the cost of collection, N254.05 billion for total transfers and refunds, and N71 billion allocated to savings. Additionally, the Excess Crude Account maintained a balance of $473,754.57.

The statement elaborated, “Gross statutory revenue of N891.934 billion was received for the month of August 2023. This was lower than the N1,150.424 billion received in July 2023 by N258.490 billion. The gross revenue available from the Value Added Tax was N345.727 billion. This was higher than the N298.789 billion available in July 2023 by N46.938 billion.”

Continue Reading


Zambia’s Finance Minister Faces Dual Challenge in Upcoming Budget Address



Zambian economy

As Zambia’s Finance Minister, Situmbeko Musokotwane, prepares to present the nation’s budget, he finds himself at a pivotal crossroads.

The second-largest copper producer in Africa is grappling with two pressing concerns: debt sustainability and soaring living costs.

Debt Restructuring Dilemma: Musokotwane’s foremost challenge is finalizing the $6.3 billion debt-restructuring deal with official creditors, led by China and France.

Delays have hindered disbursements from the International Monetary Fund (IMF) and left private creditors in limbo.

To reassure investors, a memorandum of understanding with the official creditor committee is urgently needed.

President Hakainde Hichilema emphasizes the importance of sealing these transactions to signal closure on this tumultuous chapter.

Plummeting Tax Revenue: The key copper-mining industry, which accounts for 70% of Zambia’s export earnings, is in turmoil.

First-half mining company taxes and mineral royalty collections have nosedived, adding to economic woes.

This, in turn, has depreciated the local currency, exacerbating imported inflation, particularly in fuel prices.

Rising Food Inflation: Musokotwane faces mounting political pressure to combat soaring living costs, with annual inflation reaching an 18-month high of 12%. Corn meal prices, a staple in Zambia, have surged by a staggering 67% in the past year.

Neighboring countries’ demand for corn has led to smuggling and further price spikes, raising concerns about food security.

Currency Woes: The kwacha’s value has been a barometer for the nation’s economic health. It depreciated by 16% since June 22, the worst performance among African currencies, reflecting the ongoing debt-restructuring uncertainty.

In his budget address, Musokotwane faces the daunting task of striking a balance between debt management, economic stability, and alleviating the burden on Zambia’s citizens.

The international community will keenly watch to see if his fiscal measures can steer the nation toward a path of recovery and prosperity.

Continue Reading


IMF Urges Sub-Saharan African Nations to Eliminate Tax Exemptions for Fiscal Health



IMF global - Investors King

Sub-Saharan African countries have been advised by the International Monetary Fund (IMF) to tackle their fiscal deficits by focusing on eliminating tax exemptions and bolstering domestic revenue rather than resorting to fiscal expenditure cuts, which could hamper economic growth.

The IMF conveyed this recommendation in a paper titled ‘How to avoid a debt crisis in Sub-Saharan Africa.’

The IMF’s paper emphasizes that Sub-Saharan African nations should reconsider their overreliance on expenditure cuts as a primary means of reducing fiscal deficits. Instead, they should place greater emphasis on revenue-generating measures such as eliminating tax exemptions and modernizing tax filing and payment systems.

According to the IMF, mobilizing domestic revenue is a more growth-friendly approach, particularly in countries with low initial tax levels.

The paper highlights success stories in The Gambia, Rwanda, Senegal, and Uganda, where substantial revenue increases were achieved through a combination of revenue administration and tax policy reforms.

The IMF also pointed out that enhancing the participation of women in the labor force could significantly boost Gross Domestic Product (GDP) in developing countries.

The IMF estimates that raising the rate of female labor force participation by 5.9 percentage points, which aligns with the average reduction in the participation gap observed in the top 5% of countries during 2014-19, could potentially increase GDP by approximately 8% in emerging and developing economies.

In a world grappling with the weakest medium-term growth outlook in over three decades, bridging the gender gap in labor force participation emerges as a vital reform that policymakers can implement to stimulate economic revival.

Continue Reading