THE IMPLICATIONS OF ELECTRICITY TARIFF INCREASE ON THE STANDARD OF LIVING OF NIGERIANS

CHAPTER ONE

INTRODUCTION

Background of the study 

The concept of standard of living is multifaceted, as it varies in meaning for individuals, groups, and nations. Olarinde & Omojolaibi (2023) define habituated enjoyments as the requirements, comforts, and luxuries that an individual is accustomed to. They additionally asserted that the quality of living pertains to the degree of affluence, convenience, tangible possessions, and essentialities accessible to a specific socioeconomic group within a particular geographical region, often a nation, and may be quantified using indicators such as income, poverty rate, health, and education level. Enhancing the listed elements in a sustainable manner contributes to an improved standard of living, including home electricity use. 

Masuduzzaman (2022) argues that household electricity consumption refers to the amount of power used by households for their everyday activities, which directly affects their level of living. Joyeux and Ripple (2017) argue that residential power consumption is commonly perceived as a means to improve the quality of life, hence encouraging higher levels of electricity usage. The following perspective can be concisely summarised in a cause-and-effect manner: firstly, the implementation of refrigeration, air-conditioning, and other household electrical appliances will lead to improved health. Secondly, the use of lighting, household computers, phones, radios, and televisions will facilitate education and enhance communication. Lastly, increased household productivity will result in enhanced income. Enhancements in health, education, income, and communication foster economic expansion, subsequently bolstering electricity output and leading to an increase in power consumption (Joyeux & Ripple, 2017). Our thesis is that electricity usage at the household level is a crucial measure of the standard of living for both people of a country and Nigeria. 

According to Joyeux and Ripple (2017), the impact of energy costs on the standard of life is a significant problem in the modern economy, regardless of the reasons for power consumption. Due to the rising global population, improved living standards, and fast industrialization, it is anticipated that future energy demand will increase. The rise in electricity tariffs hampers socioeconomic activities, limits economic progress, and has a detrimental impact on the overall quality of life (Oseni, 2021). The electricity tariff in this study refers to the price at which electrical energy is sold to consumers.

According to Fakehinde et al. (2019), data indicates that a mere 45% of those residing in Ikeja, Nigeria, are able to avail themselves of power. This access is characterised by its high cost and lack of reliability, as evidenced by studies conducted by Abdulkareem (2016) and Babatunde et al. (2019). Additionally, there is a persistent issue of grid collapse. To ensure reliable access to electricity, the majority of houses and businesses in Ikeja have resorted to using captive petrol and diesel generators. This is mostly owing to the high cost of electricity and the inadequate supply from the grid. Nevertheless, there are negative consequences for both the ecology and the economy of the country. Although many homes and businesses do not perceive a need for a revision of the grid-connected energy price, the reality is that consumers are now paying significantly more than what would be considered a fair and reflecting cost. Hence, conducting this study is important in order to meet this requirement.

1.2 Statement of the problem

The cost of power can significantly impact employment. First and foremost, elevated electricity rates might result in increased overall expenses and reduced competitiveness for businesses. If this occurs, the consequence will be a decrease in output, investment, and subsequently, employment. Nevertheless, elevated electricity costs result in an increased cost of capital goods, such as machinery, in comparison to labour. Consequently, this might lead to a decrease in unemployment, which in turn has a substantial impact on the overall standard of living (Bijnens, Konings, & Vanormelingen, 2018).

Facilitating business operations is a crucial element in promoting economic expansion, enticing investments, and generating employment prospects (Oshodi et al., 2021). Unfortunately, the rise in electricity prices might impede these endeavours by placing extra financial obligations on businesses, particularly small and medium-sized enterprises (SMEs), which are the foundation of our economy. This can impede the expansion of the business and diminish the quality of life for her staff.

The rise in electricity costs is expected to impose inflationary strain on the economy. Escalating electricity expenses can result in elevated production expenses for enterprises affected by the tariff increase, which could be transferred to consumers through higher pricing for products and services, thereby diminishing the quality of life for individuals. This study aims to examine the impact of a rise in energy tariffs on the quality of life in Nigeria, specifically focusing on the residents of Ikeja, Lagos State.

1.3 Objectives of the Study 

The primary objective of this study is to critically analyze the implication of electricity tariff increase on the standard of living in Nigeria (A case study of Residents of Ikeja, Lagos State). Specifically the study seeks:

To determine the extent electricity tariff increase affects the standard of living of the residents of Ikeja.

To determine the extent electricity tariff increase affects residents income level in Ikeja.

To determine the extent electricity tariff increase affects residents access to quality healthcare in Ikeja.

To determine the extent electricity tariff increase affects residents’ quality of life and well-being in Ikeja.

1.4 Research Questions

The following research questions will be answered in this study:

What is the extent electricity tariff increase affects the standard of living of the residents of Ikeja?

What is the extent electricity tariff increase affects residents income level in Ikeja?

What is the extent electricity tariff increase affects residents access to quality healthcare in Ikeja?

What is the extent electricity tariff increase affects residents’ quality of life and well-being in Ikeja?

1.5 Research Hypothesis

The following null hypothesis will validate this study:

Ho: The increase electricity tariff does not negatively affect the standard of living of the residents of Ikeja.

Ha: The increase of electricity tariff negatively affect the standard of living of the residents of Ikeja.

1.6 Significance of the study

This study will be of interest to scholars, business enterprise, government and citizens of Nigeria. As a scholar, this study will contribute to the existing body of knowledge in this area, while also serving as a valuable source of empirical reference and literature review. It will also provide a foundation for further research to the scholar.

1.7 Scope of the study

The study aims to carry out a critical analysis on the implication of electricity tariff increase on the standard of living in Nigeria. Empirically, this study will explore various literature(s) on the negative effect of hike in electricity tariff on standard of living in Nigeria. This study will be carried out among residents in Ikeja, Lagos state.

1.8 Limitation of the study

The researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that there are no much data on the topic of increase of electricity tariff; thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size covering only residents of Ikeja. Thus findings of this study cannot be used for generalization for other regions outside Ikeja. 

Additionally, the researcher will simultaneously engage in this study with other academic work which impede maximum devotion to the research. Howbeit, despite the constraint encountered during the research, all factors were downplayed in other to give the best and make the research successful.

1.9 Definition of terms

Electricity: Electricity is the set of physical phenomena associated with the presence and motion of matter possessing an electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as described by Maxwell's equations. Common phenomena are related to electricity, including lightning, static electricity, electric heating, electric discharges and many others

Tariff: A tariff is a tax imposed by one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages.