Nigeria’s plan for cost-reflective power tariffs may boost inflation

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Nigeria’s plan for cost-reflective power tariffs may boost electricity inflation, Analysts warn.

“Power must be fixed, because it’s at the heart of the cost of doing business,” Famoroti said.

Buhari wants to introduce cost-reflective tariffs to attract power investment. When the government tried to raise prices 45 percent last year, labor unions took it to court and the plan was frozen. In 2016, distributors paid only 27 percent owed to generators, who in turn couldn’t fully pay for the gas needed to run their turbines.

But While power prices are low relative to the continent, household utility costs in Nigeria are surging. About 2,500 megawatts of capacity is used for about 180 million people, who frequently endure supply cuts and resort to off-grid generators. South Africa, with a third of the population, produces at least 11 times more.

Nigeria’s February slump to 17.78 percent from 18.72 percent,  President Muhammadu Buhari’s plan to lift Nigeria’s economy from its worst slump in a quarter century may entail short-term pain for potential long-term gain.

Based on the recent released blueprint earlier in the month which proposes ways to expand the economy by 7 percent by 2020 after a 1.5 percent contraction in 2016, the first full-year decline since 1991.

With the focus to create 15 million jobs by increasing oil output in the continent’s biggest second-biggest exporter of the fuel, opening up farmland and boosting investment in power, roads and ports.

 

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