The Manufacturers Association of Nigeria (MAN) has said “incessant” and “unwarranted” increases in electricity tariffs in Nigeria are hindering the performance of the manufacturing sector.
In a statement issued on Thursday by the association’s Director General, Dr. Segun Ajayi-Kadir, he lamented the constant increase in electricity tariffs by the various electricity distribution companies in the country.
He said electricity is critical to production processes in the manufacturing sector and the lack of energy security impedes Nigeria’s industrial growth.
“Electricity is a critical input in manufacturing processes, and it has a significant impact on production cost and prices of products. Therefore, it goes without saying, that the incessant increases in electricity tariffs in Nigeria are hindering the performance of the sector and growth of the economy.
“Incidentally, 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 provides incentives for scale production and competitiveness of the industrial sector,” he argued.
He emphasized the negative impact of the high cost of electricity on the competitiveness of Nigeria’s manufacturing sector.
He said it threatens the purchasing power of Nigerians and the survival of private businesses.
“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, worsen the current inflationary pressure, aggravate the pressure on the disposable income of the average Nigerian, increase the unsold inventory of manufacturers, erode their profit margin, increase the unemployment rate and lead to the closure of more private businesses.”
GenCos, and Discos lack capacity; fail to achieve the purpose of privatisation
Ajayi- Kadir lamented that Nigeria has failed to achieve the purpose of privatising power in 2013, which is to achieve adequate generation and supply of electricity to all Nigerians.
- He argued that the power generation and distribution companies, after over a decade of privatisation, have demonstrated that they lack the technical and financial capacity to provide electricity supply for Nigerians.
- He noted that even though electricity supply has remained the same average of 4,000 to 5,000 megawatts per day, tariffs increased by over 200% in one year.
“It was based on the critical importance of energy security in achieving the industrial aspiration of Nigeria, that the Power Sector was privatized in 2013 to improve the scale of energy supply to the nation, particularly the industries.
“Unfortunately, this particular privatization 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 utilized due to the limited capacity of the GenCos and DisCos to generate and distribute adequate electricity supply nationwide.
“Despite the inability to meet the consumer demand, we have witnessed consistent increase in tariff without a commensurate and good quality supply,” the statement read.
- The DG warned the government against approving another electricity tariff hike, as “consumers will continue to bear the brunt of the inefficiency in the electricity value chain.”
- He added that manufacturers are already disadvantaged as they do not wish to transfer the burden of another tariff hike on consumers “who are currently battling with low purchasing power.”
He called on the review of the distribution company, particularly on the impact of their frequent tariff hikes on the manufacturing sector.
What you should know
- Nairametrics reported that the manufacturing sector performed poorly last year as it recorded 1.4 million unsold inventories.
- The sector’s performance was severely impacted by high energy costs, as well as other macroeconomic factors such as a high inflation rate, high exchange rate, and multiplicity of taxes.
- Meanwhile, the Federal Government has assured that it is not considering approving another increase in electricity tariffs.
