Manufacturers in Nigeria raise alarm over potential electricity tariff increase
The Manufacturers Association of Nigeria (MAN) has warned the federal government against increasing the electricity tariff in the country.
This warning comes as a result of the potential negative impact that such an increase could have on the manufacturing sector and the economy as a whole.
This warning followed reports that the government was considering a potential 65% increase in electricity tariffs.
The Special Adviser to the President on Energy, Olu Verheijen, was quoted as saying during the Mission 300 Energy Summit in Dar es Salaam, Tanzania, that the current power tariffs would rise by about two-thirds.
She was further quoted as saying Nigeria’s power prices need to rise by about two-thirds for many customers in order to reflect the cost of supplying it, adding that an increase should be expected within months.
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She however clarified that what she had said was that while tariffs currently cover approximately 65% of the actual cost of electricity supply, the government remains committed to ensuring fair pricing without imposing immediate hikes.
The Director-General of MAN, Segun Ajayi-Kadir, in a statement on Thursday stated that the incessant increases in electricity tariffs are hindering the performance of the manufacturing sector and the growth of the economy.
He emphasized that electricity is a critical input in manufacturing processes, with a significant impact on production costs and product prices.
The MAN has argued that any further increase in tariff will worsen the competitiveness of Nigerian products and businesses, leading to increased production costs, higher inflationary pressure, and reduced disposable income for consumers.
The MAN pointed out that the installed capacity of electricity in Nigeria has consistently been around 10,000 megawatts, but this capacity remains underutilized due to the limited ability of Generation Companies (GenCos) and Distribution Companies (DisCos) to generate and distribute sufficient electricity nationwide.
Despite this, there have been continuous tariff increases without a corresponding improvement in supply quality.
According to the National Bureau of Statistics, electricity supply has actually decreased, with a 5.03% decrease year-on-year and a 2.72% quarter-on-quarter decline.
The MAN therefore warned that the proposed tariff hike will have dire consequences on businesses, including increased production costs, worsened inflationary pressure, and eroded profit margins.
The association urged the federal government to commission a review of the performance of the DisCos, conduct a study on the impact of the increase on the manufacturing sector, and audit the level of investment in distribution infrastructure.
