Stakeholders: NERC’s Service-based Tariff Has Failed to Improve Supply, Revenue

Stakeholders in Nigeria's power sector argue that the Nigerian Electricity Regulatory Commission's Service-Based Tariff (SBT) model has not achieved its goals of revenue sustainability and attracting private investment needed to enhance electricity supply. Discussing the topic at the Nigeria Energy Exhibition in Lagos, officials said the tariff model, which has been in place for over three years, has not attracted the necessary investment.

Mr. Emeka Onyegbule, Chairman of Abia State Electricity Regulatory Commission, stated that the tariff model has not been effective in attracting investment due to the five different tariff bands, with only Band-A being cost-effective. Dr Johnson Akinnawo, Director of Contracting at Nigerian Bulk Electricity Trading Plc (NBET), noted that the tariff model's success depends on the broader reform programme, including World Bank support, metering, and network strengthening.

The World Bank's $750 million support for NBET, aimed at covering the tariff shortfall, was meant to work alongside mass metering, transmission projects, and distribution network improvements. However, stakeholders believe that the tariff level and system inefficiency are both responsible for the lack of cost reflectivity. The Managing Director of Lagos State Electricity Regulatory Commission, Temitope George, acknowledged that the tariff model, while well-intentioned, has created a cross-subsidy burden, with Band-A customers subsidizing other bands to generate revenue.