MAN says manufacturers spent N144 billion on alternative electricity supply, opposes tariff hike

By On Jun 24, 2023

Key Highlights

MAN said that its members’ expenditure on alternative energy went up by 87%, noting that the available alternative energy sources such as diesel had become exorbitantly expensive.
The MAN DG said a 40% tariff increase at this time would engender higher costs of production, lower profit margin, manufacturing activities paralysis, and lower revenue remittances to the government among others.
Ajayi-Kadir advised that instead of increasing tariffs, the Federal Government and NERC should ensure improved electricity generation, transmission and distribution to meet the revenue needs of the electricity supply industry stakeholders.

The Manufacturers Association of Nigeria (MAN) said that its members’ expenditure on alternative energy went up from N77.22 billion in 2021, to N144.5 billion in 2022, indicating an 87% increase in the cost of access to alternative energy sources.

This is as the association has opposed the planned increase in electricity tariff from July 1, describing it as outrageous.

According to NAN, this was made known by the Director-General of NAN, Segun Ajayi-Kadir, during an interview on Friday in Lagos, where he stated that the real sector was currently uncompetitive from the high prices used to generate power from alternative sources.

Effects of high electricity tariff on manufacturers

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

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

He said the fact that the government itself was owing N75 billion in unpaid electricity bill was indicative of how burdensome the cost of electricity had become.

The MAN DG said, “Already, we have power constituting between 28-40 percent in the cost structure of manufacturing industries.
“You can imagine the impact on manufacturing industries that are energy-intensive such as metal processing, heavy machinery, and chemicals 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.’’

How to meet revenue needs in power supply industry

Ajayi-Kadir advised that instead of increasing tariff, the Federal Government and Nigerian Electricity Regulatory Commission (NERC) should ensure improved electricity generation, transmission and distribution to meet the revenue needs of the electricity supply industry stakeholders.

He stressed that government should ensure that at least, 90% of electricity consumers were metered to ensure consumption-reflective electricity bill payment.

He also tasked the government to formulate electricity policies that would aid investments in the energy industry to increase generation capacities and usher in large-scale production of electricity.

He said, “There is an urgent need for diversification of energy sources and intensifying infrastructure investment in the power sector.
“As it is today, the manufacturing sector, which is the engine of growth, is still struggling as a result of inclement production environment in Nigeria.
“The expectation is that government will engage in extensive and intensive consultations with the manufacturers; focus on measures that will salvage the sector and halt the trend of shutdown of factories, knowing the implications and the multiplier effects on employment and the economy.
“Care should be taken to avoid introducing burdensome measures that will further strangulate the manufacturing sector and the whole economy.’’

What you should know

The Federal Government had on Monday, June 19, 2023, hinted that the N50 billion monthly electricity subsidy will be removed due to the revenue shortfall, with reports suggesting that there will be a 40% hike in electricity tariff.
The Nigeria Labour Congress (NLC) had yesterday demanded that the Federal Government immediately halt the proposed increase in electricity tariffs set to commence on July 1, 2023.
While expressing strong opposition to the plan, the NLC maintained that the increase clearly demonstrates a disregard for the welfare of consumers, particularly those in vulnerable economic situations.