ANALYZE THE EFFECTS OF INCREASED ELECTRICITY TARIFFS ON HOUSEHOLD INCOME LEVELS IN NIGERIA

CHAPTER ONE INTRODUCTION 1.1 Background of the Study Household income refers to the total earnings of individuals aged 15 years and above residing within the same household (World Bank, 2020). It serves as a key indicator of economic stability for individuals and families and can be calculated over various timeframes—monthly, quarterly, or annually (National Bureau of Statistics, 2015). Household income comprises various sources, including wages, salaries, self-employment earnings, interests, dividends, and government transfers. These earnings can differ widely across geographical regions, nations, and socio-economic groups, and are influenced by determinants such as educational attainment, occupational status, location, household size, and demographic composition (Anker, 2019). Electricity is an essential infrastructure that underpins economic development and improves the quality of life for citizens in Nigeria. The Nigerian Electricity Regulatory Commission (NERC), established under the Electric Power Sector Reform Act of 2005, is the independent body mandated to regulate electricity distribution in the country. According to NERC, the Nigerian government is projected to spend approximately ₦1.6 trillion subsidizing electricity in 2024. On April 3, 2024, NERC approved a new tariff increase for consumers in Band A category, raising the rate from ₦66 to ₦225 per kilowatt-hour (Izuaka, Premium Times, 2024). Electricity tariff refers to the rate at which electrical energy is sold to end-users, and it is calculated based on the entire production cost—ranging from power generation, wholesale transmission, and distribution to metering, billing, and delivery to consumers. In Nigeria, these tariffs are typically regulated by either the government or NERC to ensure fairness, economic sustainability, and the viability of the energy sector (Nextier, 2023). Electricity tariff adjustments have various implications on household income, including social consequences, increased financial burdens, and reductions in disposable income due to higher utility bills. Despite being one of the world’s leading producers of natural gas and other energy resources, Nigeria continues to grapple with chronic electricity issues such as erratic supply, blackouts, inadequate power generation, and frequent tariff hikes. Nigerian households largely rely on the affordability, accessibility, and reliability of electricity to enhance productivity and well-being. However, the consistent rise in electricity tariffs has adversely affected living costs, as increased utility expenses significantly strain household finances. Previous studies have examined the financial burden imposed by high electricity costs on households. Akinyele and Rayudu (2016) observed that escalating energy costs create economic hardship, particularly among rural households, and negatively impact their standard of living. Likewise, Onyeji, Bazilian, and Nussbaumer (2012) addressed the barriers to energy access in sub-Saharan Africa, emphasizing how elevated electricity tariffs hinder efforts to achieve universal energy access. According to the World Energy Outlook (2016), approximately 1.19 billion people worldwide still lack access to modern energy services, with around 55% of this population residing in sub-Saharan Africa—most of whom live in rural areas (Energy Access Projections, 2017; Akinyele & Rayudu, 2016). 1.2 Statement of the Problem Despite repeated increases in electricity tariffs across Nigeria, citizens continue to endure irregular and insufficient power supply in virtually all states, including the federal capital. Many Nigerians are compelled to pay for electricity they either did not consume or only accessed intermittently, thereby exacerbating the financial strain on households. In a nation where a large portion of the population lives in poverty or faces underemployment and unemployment, the recent tariff hikes have considerably stretched household budgets and deepened economic hardships for many families. While awareness of renewable energy solutions is gradually growing, the majority of Nigerians still rely on grid electricity provided by government agencies (Akinyele & Rayudu, 2016). Therefore, this study seeks to investigate the effects of increased electricity tariffs on household income in Nigeria, focusing on how such changes influence household expenditures and the financial challenges experienced by the average Nigerian family. 1.3 Objectives of the Study The primary objectives of the study is to analyze the effects of increased electricity tariffs on household income levels in Nigeria. Specifically, the objective of this study is; i.To determine the extent electricity tariff hike affects household income in Nigeria. ii.To find out the effects of electricity tariff hike on household income in Nigeria.  iii.To find out ways of addressing the incessant electricity tariff hikes on household income in Nigeria. 1.4 Research Question The following questions would be answered in this study: i.To what extent does electricity tariff hike affect household income in Nigeria? ii.What are the effects of electricity tariff hikes on household income in Nigeria? iii.What ways can we address the incessant electricity tariff hikes on household income in Nigeria? 1.5 Research Hypothesis The following hypothesis will validate this study: HO: The electricity tariffs hike has no effect on the income of households in Nigeria. H1: The electricity tariffs hike has an effect on the income of households in Nigeria. 1.6 Significance Of The Study The significance of the study on the impact of electricity tariff hikes on household in Nigeria and how it affects their income and standard of living. This study would help develop strategies which would mitigate effects of electricity hike in households, thus, providing economic stability. The study would help contribute to academic discuss on energy and its socio-economic impacts. Subsequent researchers would use this a literature review for their research The finds would further expose the challenges households in Nigeria face with respect to the electricity tariff hikes; how it affects the income, and productivity of the Nigerian household. The result from this study contributes immensely to the body of academic knowledge with regards to impact of electricity tariff hikes on household income in Nigeria and how it affects their income and standards of living. 1.7 Scope of the Study This study would cover the effects of increased electricity tariffs on household income levels in Nigeria. Empirically, it would determine the extent electricity tariff hike affects household income in Nigeria, the effects of electricity tariff hikes on household income in Nigeria, and ways to address the incessant electricity tariff hikes on household income in Nigeria. This study will be carried out in Nigeria. 1.8 Limitation of the Study Like in every human endeavour, the researcher encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher 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. More so, the researcher simultaneously engaged in this study with other academic work. As a result, the amount of time spent on research will be reduced. Moreover, the case study method utilized in the study posed some challenges to the investigator including the possibility of biases and poor judgment of issues. However, the investigator relied on respect for the general principles of procedures, justice, fairness, objectivity in observation and recording, and weighing of evidence to overcome the challenges. 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. 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. Household: Household is those who dwell under the same roof and compose a family, also, a social unit composed of those living together in the same dwelling Renewable Energy: Renewable energy as a form of energy that can be derived from a natural source, such as the sun, wind, tides, or waves, without exhausting natural resources or causing severe ecological damage.