The Nigerian Electricity Regulatory Commission (NERC) has called on the federal government to review the gas pricing of generation companies (GENCOs) from dollar to naira.

This announcement is in line with the pricing methodology which mandates the commission to carry out a minor review of the tariff bi-annually.

According to NERC’s Head of Public Affairs Department, Usman Arabi, over 80% of the electricity generated in Nigeria is from gas- fired power plant and the gas price is indexed to the dollar. “We have proposed to the government the option of pricing gas in local currency to mitigate the foreign exchange risk which is the major cause for the gap in tariff.”

The commission explained that the current economic condition in the country was a huge challenge to the development of the power sector.

“As Nigerians are fully aware, the macroeconomic indices such as the rate of inflation and exchange rate have steadily gone up over the last one year. This increase has affected the prices of all other commodities in the country. The purchasing power of Naira has crashed to all time low within the last couple of months. The official exchange rate in the country has risen from N198.97 to over N305.05 to a dollar. This alone is bound to trigger an increase in electricity tariff given the fact that all equipment, spare parts, meters used for the generation, transmission and distribution of electricity in Nigeria are imported. Electricity is, therefore, a product like any other product that is affected by changes in micro-economic indices.” NERC said.

It added that as at February 1, 2017, Nigeria’s inflation rate rose to 18.55% as against the normal 8.3% used in the calculation of electricity tariffs.

Anita Fatunji