ASSESSING THE EFFECT OF HIKE IN ELECTRICITY TARIFF ON ELECTRICITY CONSUMPTION PATTERNS IN NIGERIA

CHAPTER ONE

INTRODUCTION

Background of the Study

Electricity consumption pattern in Nigeria has seen significant changes over the decades. Electricity consumption in Nigeria has increased over the years driven by population growth, urbanization, and economic development (Emodi and Boo, 2015). As clearly seen, the consumption of electricity in Nigeria is mainly residential. In 2020, over 58,900 terajoules of electricity were consumed in residences. On the other hand, electrical energy used in commercial and public services reached around 27,300 terajoules, while industrial consumption stood at approximately 13,700 terajoules. (Sasu, 2022). ). Over the years, from previous researchers, the residential sector accounts for 55.3% of electricity consumption in Nigeria, which makes it the highest consumer of electricity in Nigeria.

In 2020, around 35.7 thousand gigawatt hours of electricity were generated. This was very low in comparison to the level of electricity demand, which exceeded 29 terawatt hours in the same year. Moreover, the amount of energy that was supplied reached roughly 35 gigawatt hours in 2020. (Sasu, 2022).

Nigeria faces significant energy challenges ranging from inadequate generation capacity, transmission, distribution losses, and a lack of access to electricity in the rural communities (Adekoya, 2015). In recent times, the Nigerian government has implemented policies to mitigate the electricity crisis facing the nation, including the privatization of the power section and period hikes in electricity tariff in 2020 (NERC, 2020). Despite the increasing demand, electricity supply in Nigeria is often unreliable, with frequent power outages and blackouts. Many homes and business in Nigeria often rely on alternative sources of power such as generators, solar and inverter systems (Adusah-Poku and Takeuchi, 2019).

Recent increases in electricity tariffs have been particularly significant, aiming to reflect the true cost of electricity production and distribution, thereby encouraging efficiency and attracting private investment (Akuru et al., 2021). The hike in electricity tariff has greatly affected the consumption patterns of Nigerian leading to; incredible cost of consumption, which has resulted in higher electricity bill for consumers, with many struggling to pay their utility bills. Reduced consumption; most consumers have reduced their energy consumption leading to reduced demand. Economic impact; increased cost of businesses and potential job loses etc. (ChannelsTv report by Emmanuel Egobiambu, 2024). Studies have shown that electricity tariff hikes has had significant impact on the consumption patterns including, reduced demand and increased energy poverty (International Energy Agency, 2019). In Nigeria, the hike in electricity tariff has led to protest and calls for review of the tariff order (Punch, 2020). It is therefore imperative to study these consumption patterns and how the hike in electricity tariffs affect it.

Statement of the Study

Nigeria's recent electricity tariff hike has sparked concerns about its effects on electricity consumption patterns, energy poverty, and socio-economic development (IEA, 2019; NERC, 2020). Despite efforts to improve energy efficiency and increase access to electricity, many low-income households in Nigeria still lack reliable access to electricity (Ramchandra & Boucar, 2021). The country's abundant renewable energy resources, such as solar, wind, and hydro power, remain underutilized (Emodi & Ebele, 2016). This study investigates the impact of the electricity tariff hike on electricity consumption levels among low-income households in Nigeria, building on existing research.

1.3 Objectives of the Study

The primary objective of the study is to assess the effects hike in electricity tariff has on the electricity consumption patterns in Nigerian. Specifically, the objective of the study seeks to;

To determine the extent electricity tariff hike affect electricity consumption patterns in Nigeria.

To assess the factors that aid electricity consumption patterns in Nigeria.

To investigate the implications of electricity tariff hike on the consumption patterns in Nigeria.

1.4 Research Questions.

The following research questions would be answered in the course of this study:

What is the extent electricity tariff hike affects electricity consumption patterns in Nigeria?

What are the factors that aid electricity consumption patterns in Nigeria?

What are the implications of electricity tariff hike in Nigeria?

1.5 Research Hypothesis

Here are some research hypothesis based on the case study.

H0: The extent electricity tariff hike affects electricity consumption is low.

H1: The extent electricity tariff hike affects electricity consumption is high.

1.6 Significance of the Study.

The significance of the study on assessing the effects of hike in electricity tariff on electricity consumption patterns in Nigeria would contribute to existing literature on electricity consumption patterns in Nigeria. 

It would also informs policymakers on the balance needed between cost recovery for electricity providers and affordability for consumers (World Bank, 2022).

It provides an insight into the consumption patterns and behavior in Nigeria as regards hikes in electricity tariff.

The result from this study will contributes immensely to the body of academic knowledge with regards to assessing the effects of electricity tariff hike on the electricity consumption patterns in Nigeria.

Scope of the Study

This study will focus on assessing the effects of electricity tariff hike on the electricity consumption patterns in Nigeria. This study would cover patterns and behaviors low income earners exhibit as a result on increase in the electricity tariff plans in Nigeria. Empirically, this study would determine the extent electricity tariff hike affect electricity consumption patterns in Nigeria, assess the factors that aid electricity consumption patterns in Nigeria, investigate the causes of hike in electricity tariffs in Nigeria, and finally, investigate the implications of electricity tariff hike on the consumption patterns in Nigeria.

This study would be carries out in Nigeria.

1.8 Limitation of the Study

The study may not be carried out for an extensive period of time to assess the effect of hike in electricity tariff in electricity consumption patterns in Nigeria. The sample size is also limited to Nigeria which may not reflect the overall impact of electricity hikes in the electricity consumption patterns.

The study relies of self-reported data, which is subject to biases, errors and inaccuracies.

1.9 Definition of Terms

Definition of terms used in the study

Electricity: Electricity is the power that is carried by wires, cables etc., and is used to provide light or heat, to make machines work etc. It is the flow of electric power or charge and a secondary energy source because it is produced by converting primary sources of energy into electrical power (USA, Energy Information Administration)

Tariff: Tariff is a schedule of duties imposed by a government on imported or in some countries exported goods, a duty or rate of duty imposed in such a schedule. It is a custom duty or tax levied on goods imported into the country (World Trade Organization)

Patterns: A pattern is a repeated form or design especially that is used to decorate something, “or” the regular and repeated way in which something happens or is done.

Consumption: Consumption is defined as "the act or process of consuming" or "use of something (such as fuel or food)." In the context of electricity, it refers to the amount of electrical energy used by households, businesses, or other entities.