Adedapo Adesanya
By Adedapo Adesanya
The Manufacturers Association of Nigeria (MAN) has described the plans to increase the electricity tariff from July 1 as another bad policy that could threaten businesses in the country.
The association, through its Director General, Mr Segun Ajayi-Kadi, said the real sector was currently uncompetitive due to high energy costs, especially at a time alternative energy sources were also very expensive.
The Nigerian Electricity Regulatory Commission (NERC) said the electricity tariff hike was in response to the rise of the pump price of premium motor spirit (PMS), the inflation rate at 22.41 per cent, and the devaluation of the Naira from N465/$1 to N750/$1.
Mr Ajayi-Kadir said a 40 per cent tariff increase at this time would engender higher production costs, lower profit margins, manufacturing activities paralysis, and lower revenue remittances to the government, among others.
He stated that the absence of a 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 DG said that manufacturers spent at least N144.5 billion on alternative energy in 2022, up from N77.22 billion in 2021, translating to an 87 per cent increase.
He said the fact that the government itself owned N75 billion in unpaid electricity bills was an indication 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.
“Manufacturers will ultimately pass on the additional cost to the consumers of their products, and this will increase the cost of the products in the market and complicate the rising inflation rate in the country.
“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 told the News Agency of Nigeria (NAN) in an interview in Lagos on Friday.
Mr 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 the government to formulate electricity policies that would aid investments in the 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 the 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 the 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.
Recall that the association also kicked against the planned increase of the excise duty for beer and tobacco for the 2023 fiscal year.
