SOCIO-ECONOMIC IMPACT OF ELECTRICITY TARIFF HIKE ON RURAL HOUSEHOLDS IN NIGERIA.

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Energy is a critical component of economic growth and development. Goal 7 of the United Nations Sustainable Development Goals concerns access to clean, affordable, reliable, sustainable, and modern energy for all. In many developing countries such as Nigeria, however, access to electricity remains a challenge, particularly in rural areas. That, in turn, affects people’s ability to rise out of poverty while deepening their socioeconomic challenges (United Nations Development Programme, 2014). Only about 23% of the rural population in Nigeria has access to electricity compared to about 87% for the urban population (World Bank, 2019), one of the factors that contribute to rural urban migration (Fried & Lagakos, 2017). 

This limited access to electricity in rural areas invariably has a negative effect on economic and social development, especially on women. To a large extent, women in rural areas in Nigeria are more engaged in agriculture-related economic activities than are men: women are estimated to account for about 60-80% of the rural labor force (British Council, 2012; Remi et al., 2019). In addition, women are more likely than men to work in or near the home so that they can combine childcare responsibilities with income-generating activities. Therefore, access to energy is likely to reduce the time they spend on household-related activities in favor of income-generating activities (Remi et al., 2019).

It is well established that rural electrification significantly raises the quality of life in rural households. The connection between access to electricity and rural development assesses the potential effects of rural electrification projects important (Rauf, 2018). Access to energy had been linked to sustainable livelihoods while lack of access to electricity intensifies the multifaceted development problems of many rural poor. The importance of electricity is clear: it is used by households, businesses, and industries for heating, cooling, and cooking and to support productive activities that promote overall development (Adenikinju, 2011; Akinyemi et al., 2017). Evidence also suggests a strong relationship between the lack of modern clean energy and persistent poverty (Bronicki, 2002; Cherni, 2004; Forrest, 2018). Thus, electrification of rural communities can be an effective way of reducing poverty and promoting sustainable development (Akinyemi et al., 2016; Adenikinju & Falobi, 2009; Wilhite, 2017)

Electricity is a critical component of modern life, influencing various aspects of economic and social development. In Nigeria, the electricity sector has long been plagued by issues such as inadequate infrastructure, unreliable supply, and financial inefficiencies (Fried & Lagakos, 2017). As a result, tariff hikes have been a recurrent measure to address these challenges. Olugbenga (2017) defines tariff as a means of generating revenue for the government for the improvement of the welfare of her citizenry or serves as a protection for infant industries. Tariff reduces import by raising prices. An electricity tariff is the method by which you are billed for the amount of electricity you consume. The tariff you possess is contingent upon your geographical location and the type of metre you possess. Tariffs consist of various elements, including supply charges. The cost of electricity consumption is subject to fluctuation according on the time of day or the season (ThisDay, 2024).

The Nigerian government and regulatory bodies argue that tariff hikes are necessary to ensure the financial viability of the electricity sector, attract investment, and improve service delivery (Punch, 2024). Higher tariffs are expected to generate revenue needed for infrastructure development and maintenance. Rural households typically have lower and more unstable incomes, making them more sensitive to increases in essential costs such as electricity. Understanding the impact on these households is crucial for designing equitable policies. Unlike urban areas, rural regions often lack access to alternative energy sources such as solar power or efficient fuel options (Fried & Lagakos, 2017). This dependency on electricity makes rural households more vulnerable to tariff hikes. It’s at this backdrop that this study seeks to assess the socioeconomic impact of electricity 

1.2 Statement of the Problem

The increase in electricity tariffs in Nigeria has been undertaken as a strategy to provide financial stability and enhance the dependability of the electricity supply. Nevertheless, this strategy carries substantial consequences, particularly for rural households, which frequently have distinct socio-economic difficulties.

Rural communities sometimes suffer from a lack of access to alternative energy sources such as solar electricity or efficient cooking fuels, unlike urban areas (Akande, 2024). Rural households are disproportionately impacted by tariff rises due to their reliance on the national system for power, leaving them with limited means to alleviate the consequences.  Furthermore, an increase in tariffs can have significant societal consequences, such as limited availability of crucial services like education and healthcare in rural regions. For instance, students may encounter difficulties in studying during the evenings as a result of elevated electricity expenses, while healthcare facilities may confront obstacles in delivering uninterrupted services. Rural residents may experience a negative impact on their overall quality of life (Sam et al., 2024).

In addition, gbemi (2024) points out that the government has failed to consider the social and behavioural repercussions of the energy price hike on its citizens. Jide (2024) substantiates her assertion that the increase in tariffs may lead to changes in energy use habits, thereby causing detrimental impacts on public health, education, and general welfare. Rural households in Nigeria generally exhibit lower and more volatile incomes in comparison to urban households. The rise in power prices has a substantial effect on their financial stability, compelling many to devote a greater proportion of their limited income to pay for electricity bills. The financial burden can diminish their capacity to procure other vital commodities and services, such as sustenance, education, and healthcare (Jide, 2024). Therefore, the necessity for this investigation arises.

Objectives of the study

The primary objective of this study is to critically assess the socio-economic impact of electricity tariff hike on rural households in Nigeria. Specific objectives of this study are to:

To evaluate how the electricity tariff hike affects the financial situation of rural household

To explore the effects of the tariff increase on education, healthcare, and overall quality of life for rural residents.

To determine the socioeconomic implication of electricity tariff hike on rural households in Nigeria.

To provide solutions to address challenges faced by rural household as a result of tariff hike.

1.4 Research Questions

The following research questions which are in line with the objectives of this study will be answered in this study:

How does the electricity tariff hike affect the financial situation of rural household?

What are the effects of the tariff increase on education, healthcare, and overall quality of life for rural residents?

What is the socioeconomic implication of electricity tariff hike on rural households in Nigeria?

What are the solutions to address challenges faced by rural household as a result of tariff hike?

1.5 Research Hypotheses

To determine the effectiveness of this study, the following research null hypotheses will be formulated to guide the study and it will be tested at 0.05% levels of significance.:

Ho: The are no effects of the tariff increase on education, healthcare, and overall quality of life for rural residents.

Ha: The are effects of the tariff increase on education, healthcare, and overall quality of life for rural residents

1.6 Significance of the study

The importance of this study rests in its ability to offer extensive understanding of the socio-economic consequences of electricity pricing increases on rural households in Nigeria. The study intends to provide information for energy policies that are more balanced and inclusive, with an emphasis on the vulnerable part of the population. These policies should support sustainable development and enhance the quality of life for all Nigerians, irrespective of their location or economic level. The study will provide a fundamental reference point for policymakers, rural residents, students, and academics.

The findings obtained from this study will assist decision-makers in comprehending the practical consequences of power pricing hikes. Acquiring this knowledge is crucial for making well-informed judgements that achieve a balance between financial viability and social fairness, guaranteeing that tariff policies are both economically viable and ethically equitable.

Furthermore, through the identification of the most susceptible groups within rural households and a comprehensive understanding of how they are impacted by increases in tariffs, the research will provide valuable insights for the creation of focused interventions and assistance initiatives. These measures can alleviate the negative impacts on the most vulnerable communities, thereby fostering economic fairness and diminishing poverty. The study aims to enhance ongoing initiatives in rural development and poverty reduction by offering a comprehensive analysis of the impact of power tariff increases on rural areas. This information can be used to guide efforts aimed at enhancing the overall welfare of rural inhabitants and promoting sustainable development objectives.

Moreover, future academics will employ it as a comprehensive analysis of the existing literature. As a result, other students who are interested in studying this subject will have the chance to use this work as established information that can be carefully assessed. 

1.7 Scope of the study

Broadly, this study focus is to critically assess the socio-economic impact of electricity tariff hike on rural households in Nigeria. Specifically, this study seeks to explore the effects of the tariff increase on education, healthcare, and overall quality of life for rural residents and identify the factors influencing public opinion on the tariff increase. 

Further, this study will focus on e determine the socioeconomic implication of electricity tariff hike on rural households in Nigeria and it also seeks to provide solutions to address challenges faced by rural household as a result of tariff hike.

1.8 Limitations of the study

As is common in all human endeavours, the researchers faced minor limitations when conducting the study. The main limitation was the lack of extensive literature on the subject, as there is limited data available for socio-economic impact of electricity tariff hike on rural households in Nigeria. Consequently, a significant amount of time and effort was necessary to locate the appropriate materials, books, or information and to gather data. 

Additionally, this study is constrained by its small sample size and narrow geographical scope, focusing just on Nigeria. Consequently, the results of this study are not applicable for generalization, thereby leaving room for further research. 

Furthermore, the researcher faced a time constraint due to the need to do this research while also fulfilling the obligations of attending lectures and other educational activities.

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: Tariff is a means of generating revenue for the government for the improvement of the welfare of her citizenry or serves as a protection for infant industries. Tariff reduces import by raising prices.

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