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Willingness to Pay for Reliable Electricity Supply in Nigeria: Evidence from Residential Consumers

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  • Olanrele, Iyabo

Abstract

The problem of unreliable electricity supply is a barrier to good quality of life and economic productivity. Therefore, this study examines the drivers of residential consumers' willingness to pay (WTP) for improved electricity supply and the average monetary value they can accommodate on their current tariff for 70 percent improvement. The study used a 2022 contingent valuation household survey of 215 samples in Ekiti State, Nigeria. The analysis adopts a logistic regression to determine the drivers of household WTP for the improved electricity supply using a combination of socioeconomic characteristics, electricity supply profile, and maximum tariff bid. Household characteristics such as education, household size, income, expenditure on backup generator fuel, and bid are the likely determinants of WTP for reliable electricity supply. The derivation of mean WTP from the logistic estimation shows that the residential consumers could pay N164.81/kWh (~US$ 0.37/ kWh) for a 70 percent improved electricity supply. The mean willingness to pay represents an extra N108.93kWh (~U$0.25/kWh) over the current tariff and an increment of about 194.94 percent per kilowatt of electricity. The higher premium is acceptable by 85 percent of the households surveyed. These findings provide evidence about the WTP for reliable electricity supply and its determination, which is vital for policy direction on future tariff setting in Nigeria. The study recommends that the electricity sector regulator stipulate a minimum investment requirement for improved electricity supply.

Suggested Citation

  • Olanrele, Iyabo, 2024. "Willingness to Pay for Reliable Electricity Supply in Nigeria: Evidence from Residential Consumers," African Journal of Economic Review, African Journal of Economic Review, vol. 13(1).
    • Handle: RePEc:ags:afjecr:362937
    DOI: 10.22004/ag.econ.362937
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    References listed on IDEAS

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    1. Joseph Cooper & John Loomis, 1992. "Sensitivity of Willingness-to-Pay Estimates to Bid Design in Dichotomous Choice Contingent Valuation Models," Land Economics, University of Wisconsin Press, vol. 68(2), pages 211-224.
    2. Kamanyire, Maxwell Clovice & Matovu, Fred & Wabiga, Paul, 2024. "Electricity Accessibility and Household Business Start-ups in Rural Uganda: Evidence from Quasi-Experimental Analysis," African Journal of Economic Review, African Journal of Economic Review, vol. 12(3), September.
    3. Fredrik Carlsson & Peter Martinsson, 2007. "Willingness to Pay among Swedish Households to Avoid Power Outages: A Random Parameter Tobit Model Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 75-90.
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