The Institute of Chartered Accountants of Nigeria (ICAN) has called on the National Energy Regulatory Commission (NERC) and electricity distribution companies (Discos) to review and reschedule their plan to increase electricity tariffs in the country.
ICAN said delaying the increase in the electricity tariff was important because Nigerians are presently grappling with the consequences of the recently introduced market determined exchange rate and removal of petrol subsidy.
Dr. Innocent Okwuosa, President of ICAN, made the call on behalf of ICAN, on Wednesday, in a press statement.
Okwuosa said: “We recommend that the NERC and the DISCOs should defer the implementation of a rate increase to a future date because Nigerians are still grappling with the effects of macroeconomic policy decisions, such as the removal of petrol subsidy and the unification of the foreign exchange rates.
“The proposed increase at this time will further worsen the plight of the masses and push Nigerians into multidimensional poverty.
“Furthermore, the increase will significantly an increase the cost of doing business, particularly for the SMEs. These enterprises may be unable to pass on the additional costs to their customers, increasing the risk of business closures and further worsening the unemployment rate.”
Okwuosa said government and NERC should consider additional short-term tax breaks and other incentives to the Discos as a form of production-focused, rather than consumption-focused subsidy, as an alternative to the hike.
He added that the Discos would, however, need to demonstrate better accountability and transparency in governance and reporting, and that, “this is an area in which chartered accountants can provide valuable support.”
He further said: “The Discos should invest further in their distribution network to reduce the technical losses and build a platform for sustainable electricity distribution.”
He stated that ICAN’s members possess the expertise and experience to support the commission and the Discos, “in providing deep insights on the inputs, market conditions and assumptions related to the proposed price increases,” and could support their efforts “to ensure transparency, fairness and accountability in the electricity sector.”
He noted that ICAN’s review of the applications made by nine Discos for the increase in electricity tariff showed that there were some areas that required further considerations and disclosures.
These areas, according to him, included their cost breakdown, socio-economic impact assessment, macroeconomic and investment assumptions, as well as capital and operation expenditure provisions.
The ICAN scribe said, “apart from two discos, others did not breakdown cost implicitly to justify the proposed review. Also, the application mentions the need for cost recovery but fails to provide a comprehensive breakdown of the costs incurred.
“We believe that transparent and evidence-based justifications are essential to ensure fairness, accountability, and the protection of consumer interests.”
He added that, “while some applications claim to have conducted an analysis of customer usage patterns, income levels, and socio-economic factors, they lack specific details on the methodology and findings of this assessment.
“A thorough and transparent socio-economic impact assessment is necessary to ensure that the proposed rate adjustments do not disproportionately burden consumers, particularly those with lower incomes. Without sufficient evidence, it is challenging to evaluate the true affordability implications for consumers.”
Commenting on the macroeconomic and investment assumptions of the Discos, the institute stated that, “the applications present macroeconomic and investment assumptions for future years but do not provide reliable sources or a comprehensive analysis of how these factors have been considered in determining the proposed rate adjustments.”