Electricity tariff increase, 7.5 per cent VAT on petrol unsettles Nigerians

Nigerians are facing more economic woes as the government plans to increase electricity tariff by 40 per cent in July and impose a 7.5 per cent value added tax (VAT) on petrol. These policies are part of President Bola Ahmed Tinubu’s economic reforms that have been praised by foreign investors but also caused hardship for many Nigerians.

The electricity tariff hike is scheduled to take effect from July 1, signalling an end to electricity subsidy which costs the government about N50 billion monthly12. The Nigerian Electricity Regulatory Commission (NERC) has approved the new tariff for the 11 Distribution Companies (DisCos), which will vary according to the service level and customer class.

The tariff increase is expected to improve the revenue and performance of the DisCos, which have been struggling with low collection rates, high technical and commercial losses, and inadequate metering of customers. It is also aimed at attracting more investments into the power sector and enhancing service delivery and quality supply.

However, the tariff hike will also add to the burden of consumers, who are already paying high bills for erratic and insufficient power supply. Many Nigerians rely on alternative sources of power such as generators, inverters and solar panels, which are also costly to maintain. The tariff hike will also affect the cost of production and operation of businesses, especially small and medium enterprises, which may pass on the cost to their customers or reduce their workforce.

The VAT on petrol is another policy that has unsettled Nigerians, who are still reeling from the removal of fuel subsidy by Tinubu in his first day in office. The removal of subsidy led to a tripling of petrol prices from N87 per litre to N262 per litre, triggering panic-buying and transport chaos.

The VAT on petrol will further increase the pump price by 7.5 per cent, which will translate to higher transportation costs for commuters and motorists. It will also affect the prices of food, goods and services that depend on petrol for transportation or production. The VAT on petrol will also increase the cost of running generators, which many Nigerians use to supplement or substitute for grid power.

Tinubu’s economic reforms are aimed at streamlining the country’s foreign exchange system, unifying multiple exchange rates, reducing fiscal deficits, attracting foreign investments, improving transparency and accountability, and enhancing economic growth and development45. However, they also have negative effects on the living standards of Nigerians, who are already facing high inflation, unemployment, poverty and insecurity.

Many Nigerians have expressed their dissatisfaction with Tinubu’s economic reforms, saying they are too fast, too much and too harsh. They have called on the government to provide palliatives to cushion the effects of the policies and to consider the welfare of the masses.

Some experts have also advised Tinubu to reconsider some of his policies or to provide alternatives to mitigate their impact. They have suggested that the government should suspend the VAT on petrol to avoid further fuelling inflation and compounding the burden on individuals and businesses4. They have also suggested that the government should provide mass transit buses, housing schemes and social welfare programmes to ease the pain of Nigerians.

Tinubu’s economic reforms are a mixed bag for Nigerians. While they may have long-term benefits for the country’s economy and development, they also have short-term costs for the people’s livelihoods and wellbeing. The challenge for Tinubu is to balance his reform agenda with his social responsibility and to communicate his vision and strategy effectively to Nigerians.

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