Nigerians celebrated the New Year of 2023 with the news of increment in electricity tariff. Most of the electricity distribution companies in Nigeria effected the increase starting from the MD (Maximum Demand) customers and other bands. Customers reported changes of their tariff from the rate of N61.75 to around N77.2 per kwh in the month of January.
However, the Nigerian Electricity Regulatory Commission has released a statement clarifying the circumstances and reminding the electricity consumers the agreement with DISCOs (Tariff Order of January 1, 2021) on systematic increment in tariff over a certain period to accommodate inflation and high cost of sourcing for forex in Nigeria.
“The Commission” affirms that “NO approval has been granted for a 50% tariff increase in the Tariff Order for electricity distribution companies which took effect on January 1, 2021. On the contrary, the tariff for customers on service bands D & E (customers being served less than an average of 12hrs of supply per day over a period of one month) remains frozen and subsidised in line with the policy direction of the Federal Government. In compliance with the provisions of the Electric Power Sector Reform Act (EPRSA) and the nation’s tariff methodology for biannual minor review, the rates for service bands A, B, C, D and E have been adjusted by NGN2.00 to NGN4.00 per kWhr to reflect the partial impact of inflation and movement in foreign exchange rates”.
“In the light of strong public interest on this matter, the media is hereby requested to retract their earlier publications misinforming electricity consumers nationwide about a purported 50% increase in electricity tariffs” this is according to the statement released by NERC.
In another news, NERC has approved the application from Ibom Utility company to operate an independent electricity distribution network licence which will enable the company distribute electricity in selected locations in Akwa Ibom State. At the moment, Port Harcourt Electricity Distribution Company covers the Akwa Ibom State.
The world has never been static. It evolves and revolves. Ever dynamic effect of the world has also affected all its constituents including her economy which encompasses all activities related to production, consumption and trade of goods and services. The year 2022 started on a shaky note but ended with mostly negative indices. For example, the UK ended the year 2022 with a double figure inflation as against single digit at the beginning of same year. Experts have warned the new year 2023 might just be the period where the consequences of all of these would be felt the most. The following are factors that will would affect the global economic outlook for the year 2023;
Ukraine and Russia War
What began with mere speculation eventually turned into a real war. The kremlin invaded Ukraine on the 24th of February 2022 and since have been waging war. Since the beginning of the war, there has been Europe’s largest refugee crisis since World War II, Russia’s GDP for the year reduced to a 3–4 percent, about 8 million Ukrainians were displaced within their country by late May, and more than 7.9 million fled the country by 3 January 2023 and Ukraine’s economy contracts by average of 44% according to study.
The special military operation as claimed by the Russia Authority in Ukraine has resulted into about €93.8 billion from 40 countries in financial, humanitarian, and military aid to Ukraine, from 24th January to 3rd October of 2022 according to The Kiel Institute. These funds could have been devoted to local economies which would in turn assist the Global Economy.
Energy Crises
Energy has been one of the driving force of the Global economy. Fossil fuel and Natural Gas are critical in manufacturing industry and household consumption. The Ukraine and Russia have has disrupted in natural Gas chain supply globally and has caused unpredicted inflation, Gas and electricity crises in Europe. The winter is here, the energy crises will forcefully cause higher spike in inflation first quarter of the year 2023.
Global Food Crises
The world is experiencing shortage and disruption in food supply. Ukraine who’s is the world’s largest supply of grains has been fighting war with serious effected on farming in the country. Shortage of grain globally has also caused almost 40% inflation in poultry and bakery products in both developed and developing counties.
According to theguardian “UK food price inflation has hit a new high of 12.4%, according to data from the British Retail Consortium, with fresh foods leading the rises.” It’s been an incredibly stressful week, says White (manager at a foodbank in UK), “with a big shift in numbers seeking their help and the urgency” We expect these crises to spill to the year 2023 effectively throughout the first quarter.
Climate Change
Climate change was seen as a myth especially by some policy makers but it has never been this real. The continuous change in weather condition has affected farming conditions leading to poor outputs. Energy generation from renewable energy sources are been impacted by climate change hereby leading to reduction in energy output. “One of the biggest concerns sceptics raise about renewable energy is its intermittent nature or the idea that the sun does not shine all the time, nor does the wind blow every day”.
Resurgence of Covid
Covid pandemic ravaged the world for almost two years. The pandemic which stated in China 2019, affected the Global economy from 2020 to 2021. By the end of 2021, countries have stated recovery process by opening up and lifting restrictions except for China who still maintains Covid restriction throughout the year 2022 till the month of December same year. However, when China opened up, we realized it was mainly due to pollical pressure and that cases of Covid effection continually increase with mortality rate peaking. As at January 2023, travel restriction out of China has been lifted and expert feared this could once again lead to a global pandemic. Few countries are recording new cases of Covid infection already. The Global economy can once again be impacted negatively due to Covid infection in the year 2023.
Economy Outlook for Nigeria in 2023
Nigeria has been flat footed throughout the year 2022. All indices seems to be negative and on a sliding mode. With the current population of over 219m according to worldometers, about 113m of Nigerians are living in poverty according to a report by the National Bureau of Statistics (NBS) announced November 2022.
According to the Debt Management Office, DMO in December 2022, Nigeria’s public debt reached N44.6 trillion in the third quarter of the year (Q3 in 2022) This represents a 2.9 per cent quarter-on-quarter decline when compared to N42.84 trillion recorded in Q2 in 2022.
Also, Going by the data published by the NNPC, the Federal Government spends about N40.1bn daily when subsidising every litre of petrol consumed in Nigeria by at least N600. This also means that the government is spending about N1.243tn on fuel subsidy every month. The Federal Government plans to remove fuel subsidy in the year 2023.
The annual inflation rate in Nigeria accelerated for the 10th straight month to 21.47% in November of 2022 from 21.09% in October and above market estimates of 21.15% according to Trading Economics. The Central Bank of Nigeria raised the Interest rate to 16.5% as at its November 2022 meeting. This indicates fourth straight rate increase so far in the year 2022.
The Naira continues to fall to dollar and access to forex by most Nigerians for businesses and other domestic use have been through the black market. Recently, most Nigerian banks blocked access to forex via local Master or Visa cards. Demand for forex especially prospective international students seeking greener pastures abroad is also reducing the value of Naira daily. There is also the issue of foreign reserve deficit. The reserves has declined from about $40billion dollars in January 2022 to an estimate of $37billion in December 2022.
What to Expect in the New Year 2023
Inflation rate in Nigeria is expected to continue rise in the first two quarters of the year 2023 due to the combination of the above-mentioned factors. Cash less policy if well implemented will stabilize the Nigeria economy by the end of the second quarter.
It is the Election Year in Nigeria, the new government will resume effectively from the month of May 2023. But till this period, we don’t expect much improvement in most ecomomic sectors for example, insecurity will continue to affect cost of agricultural products and contributes to the county inflation rate.
Nigeria will not be able to attract much more needed foreign investors for the first half of the year 2023 and rate of employment is also not going to improve anyway.
Nigeria will continue to lose her professionals in all the sectors of the economy for better opportunities in foreign countries.
Tips for Folks
1. Cut spending as much as possible and save more.
2. Stay healthy as much as possible as health is wealth.
3. The cost of food and groceries are on the increase, it will continue into the year, Nigerians must be strategic and wise.
4. There have been no significant efforts from the Government to improve employment. The rate of unemployment will be peaking to the second quarter of 2023.
5. Small scale businesses will thrive in the midst of baldly managed economy.
6. Always have a product to sell or service to render.
