Manufacturers Warn Against Planned 40% Hike in Electricity Tariff

The Manufacturers Association of Nigeria (MAN) has warned that the planned hike in the electricity tariff will erode the profit margin of operators in the real sector and reduce their ability to expand operations and create new jobs.

MAN noted that manufacturers will ultimately pass on the additional cost to the consumers of their products, leading to increase the cost of the products in the market and complicate the rising inflation rate in the country.

Mr. Segun Ajayi-Kadir, Director-General, MAN, said this in reaction to recent announcement to increase electricity tariff from July 1.

According to the Nigerian Electricity Regulatory Commission (NERC), the increase was in response to the rise of the pump price of premium motor spirit (PMS) the rise in inflation rate which was at 22.41 per cent, and a shift in the exchange rate from N441 to N750.

But the MAN Chairman who spoke in an interview with the NEWS Agency of Nigeria described the planned increase as outrageous

According to him, a 40 per cent tariff increase at this time would engender higher costs of production, lower profit margin, manufacturing activities paralysis, lower revenue remittances to government among others.

He stated that the absence of stable, effective and fairly priced electricity supply in Nigeria had been a long-standing challenge for manufacturers which compelled them to supplement with alternative energy sources.

Regrettably, he noted that the available alternative energy sources such as diesel had become exorbitantly expensive.

The MAN director general said that manufacturers spent at least N144.5 billion on sourcing alternative energy in 2022, up from N77.22 billion in 2021, translating to 87 per cent increase in the cost of access to alternative energy sources.

He said the fact that government itself was owing N75 billion in unpaid electricity bill was indicative of how burdensome the cost of electricity had become.

“Already, we have power constituting between 28-40 per cent in the cost structure of manufacturing industries.

“You can imagine the impact on manufacturing industries that are energy-intensive such as metal processing, heavy machinery, and chemicals manufacturing.

“A spike in the electricity tariff will erode the profit margin of the manufacturers and reduce their ability to expand operations and create new jobs.

“Also, the sector’s competitiveness will definitely worsen as the high cost of the products will make locally produced items less competitive, when compared with imported alternatives,” he said.

Ajayi-Kadir advised the Federal Government and Nigerian Electricity Regulatory Commission (NERC) to instead, ensure improved electricity generation, transmission and distribution to meet the revenue needs of the electricity supply industry stakeholders.

He stressed that government should ensure that at least , 90 per cent of electricity consumers were metered to ensure consumption reflective electricity bill payment.

He also tasked government to formulate electricity policies that would aid investments in energy industry to increase generation capacities and usher in large scale production of electricity.

“There is an urgent need for diversification of energy sources and intensifying infrastructure investment in the power sector.

“As it is today, the manufacturing sector, which is the engine of growth, is still struggling as a result of inclement production environment in Nigeria.

“The expectation is that government will engage in extensive and intensive consultations with the manufacturers; focus on measures that will salvage the sector and halt the trend of shutdown of factories, knowing the implications and the multiplier effects on employment and the economy.

“Care should be taken to avoid introducing burdensome measures that will further strangulate the manufacturing sector and the whole economy,” he said. NAN

June 24, 2023