Nigeria’s energy crisis worsens as rates for utility services hit historic highs, negatively impacting home and office budgets nationwide.
The 11 percent increase in the price of natural gas for strategic domestic sectors (including power generation companies) instigated a roll-on effect on prices of electricity, aviation fuel and domestic gas.
Farouk Ahmed, chief executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, announced the increase on April Fools Day 2024.
Simultaneously, government electricity regulator slammed a rate hike of 300 percent rate. The tariff moved from N66 to N225 per kilowatt hour for consumers allegedly enjoying 20 hours of electricity daily.
Nigeria Electricity Regulatory Commission linked this approval to the 11 percent increase in the price of gas supplied to electricity generation companies.
The new rates caught manufacturers and managers of offices and homes unawares, leaving them scrambling to adjust their budgets.
This week, rates for domestic cooking gas, also known as liquefied natural gas (LNG) rose by over 30 percent to N1,132 per kilogram on the streets. A standard 12.5kg cylinder which hitherto sold for N10,000 is now selling at N14,150.
Airline operators also reported rate increases in aviation fuel threaten their business projections and may lead to further increases in flight fare. Aviation fuel now sells for between N1,300 and N1,500, a 33 percent increase. Natural gas hitherto sold to power generation companies at $2.18 per mmbtu is now selling for $2.42.
Implications of rising energy costs
Economists fear that the current situation exacerbates energy-driven inflation and is counterproductive to the ongoing economic reforms of the Tinubu administration.
“It certainly will widen income inequalities and deepen the losses we are experiencing in economic growth and production,” said Dr. Okay Ugwuanambala, an Enugu-based energy analyst.
According to him, the people hit the most are still those facing multidimensional poverty in Nigeria. “We have added energy poverty to the challenges they are currently facing with household budgeting and food shortages.
“Let us just hope that this will not push them into social unrest because we now have a dangerous combination of food insecurity and poverty.
“As you can see, no sector is immune from this energy crisis. The recent electricity increases mean that our industries have become energy intensive. Cost of goods will rise further.
“I think it is easy to predict how the aviation, shipping and chemical industries will cope with higher fuel costs. Food prices will naturally rise. So will the cost of travel, by road and by air.”
Government’s response
Government said that it is making every effort to enable citizens cope with the rising prices of domestic gas.
Petroleum Minister (Gas), Ekperikpe Ekpo announced that the government withdrew all taxes and levies from importation of gas related equipment.
It is a big incentive, he said.
“We are interacting with the critical stakeholders to ensure that there is no exportation of cooking gas.
Ekpo spoke about plans to domesticate locally produced cooking gas to increase the volume crash prices.
Slug: Nigeria’s energy crisis worsens in April 2024
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