The increase of more than 130% in the price of diesel in seven months to 780 naira per liter has led to an increase of about 76% in the electricity tariff in serviced residential estates in Nigerian cities.
This has added to rising costs for occupants of residential and commercial property, according to a new report.
The report, compiled by Estate Intel, an online property search platform, highlights the measures taken by operators in the residential real estate market to deal with rising diesel prices.
Different developments use different energy consumption models, but they have in common the tariff system, which charges residents or occupants according to their level of consumption.
Frank Okosun, Senior Partner/CEO of Knight Frank Nigeria, had told BusinessDay in an interview that in the serviced estates they managed, they had been able to create a convenient system that made payment for energy consumed and other less stressful services.
“We’ve separated the service charge from the house rent to make payments easier and give tenants the flexibility to determine how and when they want electricity delivered to their apartments,” he said.
That means those who can afford 24-hour power can get it while those who only want six hours get it, he said.
“But what we’ve mainly seen is that tenants are now opting for reduced power supply in response to economic realities that have seen many people struggling with rising costs,” Okosun added.
Dolapo Omidire, Founder/CEO of Estate Intel, noted that there have been changes in most areas.
He told BusinessDay that in March this year they began documenting how residential occupiers and facility managers were responding to the high price of diesel.
“With the help of real estate technology companies Venco and Gatepass, we also tracked rate developments and energy policy changes in several residential communities across the country,” he said.
Omidire said that in the 22 areas surveyed in Yaba, Ikeja, Surulere, Victoria Island, Lekki Phase 1, Ikoyi, Osapa, Chevron and Ajah, they found that the average electricity tariff increased by 76% from 90/KwH to 178/KwH between February and July.
According to him, because it was impossible to accurately estimate the amount of electricity to be supplied from the national grid, facility managers and owners usually ask occupants to pay a deposit based on expected consumption.
“This deposit will be drawn based on metered usage or a simple split among all occupants. Rollovers or refill requests will be made as needed,” he said.
He said all of the serviced estates and communities surveyed operate a tariff-based system, which involves a single energy cost that mixes payments to the national grid and payment for internally generated energy, usually diesel.
“These tariffs, usually measured in naira per kilowatt-hour, allow occupants to be billed relatively simply on all their energy consumption,” he said.
Also Read: How Regional Grids Can Solve Nigeria’s Electricity Problems
During the reporting period, he said, a three-bedroom apartment saw its total energy expenditure rise from N70,000 to N140,000 per month, adding that in the current high inflation environment, Nigerians end up where incomes have yet to rise, things are getting too tough for the average Nigerian.
In his reaction to the tariff price increases, Nahel Jarmakani, Managing Director of Green Key Facility Management, said before the price hike anyone who had surveyed the market would find that tariffs ranged from N70 per kWh to N95 per kWh.
“GreenKey was on the low end and had posted N72-N78 in all areas we manage. Having an attractive rate was a key competitive advantage for us and helped us maintain a high level of customer loyalty. When the crises hit, these rates were unreachable and a big increase was expected,” he said.
He pointed out, however, that what was not expected was how neat it would be, as some areas have started charging up to N320 per kWh, which is why many community managers have began to examine how these tariffs were calculated. “Any facility manager without a good and transparent system was in trouble,” he said.
Apart from adjusting to the increase in electricity tariffs, the residential market is also reacting to the management efficiency of facility managers. Occupants of the estate are now aware and skeptical of how their money is being used.
“For us, the increase in the price of diesel exposed the inefficiencies of our facilities manager and the facilities management process. Prior to a recent change, we were not informed of how service fees were spent; so it was hard to know if we had surpluses or shortfalls,” said an occupier of the estate who did not want to be named.
Continuing, the occupier said that when diesel prices increased and the facility manager asked for more money, tenants were reluctant to pay, “not because we weren’t aware of the increases, but because we were skeptical about how the funds were handled.”
“Even though our old facility manager has been replaced, the new person also doesn’t have the ability to do much. My family has decided to leave and we also know of other tenants who are making similar arrangements,” he added.