It's outrageous – Manufacturers kick against planned 40 percent electricity tariff hike

DAILY POST

The Manufacturers Association of Nigeria, MAN, has described plans to increase electricity tariffs from July 1 as outrageous.

The association said the sector was uncompetitive from the high prices used to generate power from alternative sources.

Mr Segun Ajayi-Kadir, Director-General, MAN, made this known in an interview with the News Agency of Nigeria (NAN) on Friday in Lagos.

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

But, Ajayi-Kadir said a 40 per cent tariff increase at this time would engender higher production costs, lower profit margin, manufacturing activities paralysis, and lower revenue remittances to the government, among others.

He stated that the absence of a stable, effective and reasonably 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 alternative energy sources, such as diesel, had become exorbitantly expensive.

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

He said the fact that the government itself was owed N75 billion in unpaid electricity bills 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 energy-intensive manufacturing industries such as metal processing, heavy machinery, and chemical 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 said.

Ajayi-Kadir advised the Federal Government and NERC to ensure improved electricity generation, transmission and distribution to meet the revenue needs of the electricity supply industry stakeholders.