40% Hike In Electricity Tariff Will Affect Businesses Negatively— MAN

The Manufacturers Association of Nigeria (MAN) has set conditions that will result in a win-win situation when the Nigerian Electricity Regulatory Commission (NERC) eventually hikes tariffs and the top priority is for manufacturers to buy gas in naira.

The MAN president Francis Meshionye said if the 40 per cent tariff hike becomes effective, “people (manufacturers) will start closing shops” at the detriment of the Nigerian economy.

Over the last eight years, electricity tariffs have been increased by 186 per cent and the Nigerian Electricity Regulatory Commission has announced an additional 40 per cent hike in Tariff beginning July 1, 2023.

The Abuja Electricity Distribution Company informed customers on Sunday to brace up for higher tariffs by July 1, blaming the situation on exchange rate differentials which rose from N441 to $1 to approximately N750 to $1 after the floating of naira.

Manufacturers from Lagos to Abuja and in other parts of the country have to battle weak power supply, foreign exchange challenges, multiple taxations, and bad infrastructure culminating in higher costs and lower margins.

Several members of MAN have exited Africa’s biggest economy over the high costs of operation, according to the association.

Nigeria’s manufacturing sector fell to 1.61 per cent (year-on-year) in real terms in Q1 2023 from 2.83 per cent in Q4 2022 and 5.89 percent in the corresponding period of 2022.

Meshioye said, “It will be a futile attempt and not quite reasonable to say I could get my money from ABC and say I want to increase the cost. It is not prudent. What government should have done is to make sure that everyone gets metered so that you don’t do an estimated billing and you make sure that everybody who takes electricity from you pays money. We believe it is the responsibility of the government and NERC to make sure everybody is within the net and it gives you the opportunity to lower your cost.

“Be sure that you metre everybody; run an efficient system and ensure competitiveness and look for an alternate source of generating power.

“Apart from efficiency in the supply chain, what manufacturing could do using gas and everything. We don’t have a special tariff we enjoy seriously. Manufacturers have complained to NERC recently about a couple of things. We have a road map on how the tariffs should be increased but you find that NERC will come and just increase the tariff without consultation. This is unfair. You need to be sure that if you agreed on a road map, you follow that road map and MAN has to seek legal resolution on this and NERC knows about this. That is number one.

“They have to make a policy for the manufacturers to get access to gas. Another bottleneck is that the prices of gas are paid in dollars. Manufacturers are saying let us pay in naira because we are consuming it here and our common denomination currency is naira. So, if our currency is naira and we are going to price in naira, why do we have to pay for gas that you generate and will help Nigeria in foreign currency?”

On the solution, Meshioye said the government must ensure that the gas pipelines are available across the country and not only in Lagos and Ogun.

“Stop making manufacturers pay in dollars. Make it possible to pay in naira which is the national currency. If there is anywhere that you have an agreed price charge scale increase, it should be abided with. It should not be at any point truncated and you just start all over and we are dragging on this,” the MAN president said.