The Manufacturers Association of Nigeria (MAN) has issued a cautionary statement, expressing concerns that the proposed electricity tariff increment starting on July 1st could pose a significant threat to businesses operating within the country.
Segun Ajayi-Kadir, the Director-General of the association, highlighted the current lack of competitiveness in the real sector due to the soaring costs of energy. This concern arises particularly at a time when alternative energy sources are also exorbitantly priced.
“Increasing the tariff by 40% at this juncture would lead to escalated production costs, diminished profit margins, a standstill in manufacturing activities, and reduced revenue contributions to the government, among other detrimental consequences,” remarked Ajayi-Kadir.
He emphasized that the absence of a stable, efficient, and reasonably priced electricity supply has long been an enduring challenge for manufacturers, compelling them to supplement their energy needs with alternative sources.
“Regrettably, the available alternative energy options, such as diesel, have become prohibitively costly,” he lamented.
Ajayi-Kadir disclosed that manufacturers spent a substantial N144.5 billion on alternative energy in 2022, a sharp increase from N77.22 billion in 2021, representing an 87% surge.
He further pointed out that the fact that the government itself owes a staggering N75 billion in unpaid electricity bills is a testament to the burdensome nature of electricity costs.
“Presently, power expenses account for approximately 28-40% of the cost structure for manufacturing industries,” he explained. “The impact on energy-intensive sectors like metal processing, heavy machinery, and chemicals manufacturing is undoubtedly profound.”
Ajayi-Kadir urged the federal government and the Nigerian Electricity Regulatory Commission (NERC) to prioritize enhancing electricity generation, transmission, and distribution to meet the revenue requirements of stakeholders within the electricity supply industry.
He emphasized the government’s responsibility to ensure that at least 90% of electricity consumers have meters to enable billing that accurately reflects consumption.
Additionally, he called upon the government to formulate electricity policies that would facilitate investments in the energy sector, leading to increased generation capacities and the implementation of large-scale electricity production.
“There is an urgent imperative to diversify energy sources and intensify infrastructure investments in the power sector,” he stressed.
“As it stands today, the manufacturing sector, which serves as the engine of growth, continues to grapple with an unfavourable production environment in Nigeria.”
Ajayi-Kadir expressed the expectation that the government would engage in comprehensive and extensive consultations with manufacturers, focusing on measures that would salvage the sector and prevent the widespread closure of factories, given the potential implications and ripple effects on employment and the economy.
“Caution must be exercised to avoid the introduction of burdensome measures that would further stifle the manufacturing sector and the overall economy,” he cautioned.
In conclusion, MAN has issued a warning regarding the detrimental impact the proposed electricity tariff hike could have on the manufacturing sector, which plays a pivotal role in driving economic growth in Nigeria. The association has called upon the government to reconsider the tariff hike and instead concentrate on improving the reliability and affordability of electricity supply.
