Frequent electricity tariff hikes hurt manufacturing growth – MAN

The Manufacturers Association of Nigeria (MAN) has said that the incessant increase in electricity tariff in Nigeria is hurting the performance of the sector and growth of the Nigerian economy.

MAN stated that electricity is a critical input in manufacturing processes, and it has a significant impact on production costs and prices of products.

“The proposed increase in electricity tariff is inimical to the competitiveness of Nigerian products and businesses as it will further exacerbate the impact of high cost of production and worsen the current inflationary pressure,” ,” said Segun Ajayi- Kadir, director general MAN in a statement.

The director general added that it will aggravate the pressure on the disposable income of the average Nigerian, increase the unsold inventory of manufacturers, erode their profit margin, increase unemployment rate and lead to closure of more private businesses.

Kadir noted that no nation can attain significant industrial development without energy security, which is timely access to sustainable and cost-effective energy.

“Sustainable and low-cost energy supply provide incentives for scale production and competitiveness of the industrial sector,” he said.

He said that it was based on the critical importance of energy security in achieving the industrial aspiration of Nigeria, that the Power Sector was privatised in 2013 to improve the scale of energy supply to the nation, particularly the industries.

“Unfortunately, this particular privatisation has not yielded the desired results. It is widely believed that this is because the operators in the value chain lack the technical and financial capacity to operate and deliver optimally.

“The installed capacity has been consistently put around 10,000MW and it has not been fully utilised due to the limited capacity of the GenCos and DisCos to generate and distribute adequate electricity supply nationwide,” Kadir said.

He added that despite the inability to meet the consumer demand, manufacturers have witnessed consistent increase in tariff without a commensurate and good quality supply.

According to National Bureau of Statistics (NBS), the electricity supply stood at 5,909.83 (Gwh) in Q2 2023 but reduced to 5,769.52 (Gwh) in Q1 2024 and 5,612.52 (Gwh) in Q2 2024 when the tariff increase of over 230 percent was implemented. Thus, indicating 5.03 percent decrease year on year and 2.72 percent quarter on quarter.

“MAN has severally advocated for an increase in electricity supply from the abysmal average of 4,000MW of electricity per day for over 200 million people whereas Nigeria needs more than 30,000MW of electricity to appreciably meet the growing electricity demands by businesses and households in the country,” Kadir noted.

He further said that the persistent increase in tariff means that consumers will continue to bear the brunt of the inefficiency in the electricity value chain.

“As it stands, manufacturers are disadvantaged as the increase cannot be transferred to consumers who are currently battling with low purchasing power.

“The advice would be that government should commission a review of the performance of the DisCos after the last unwarranted increase; conduct a study on the impact of the increase on the manufacturing sector in particular, businesses and households in general; sincerely and critically interrogate the so-called cost reflective tariff template of the DisCos, and audit their level of commitment to investment in distribution infrastructure,” Kadir said.

News Credit: Business Day