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MAN noted that manufacturers will ultimately pass on the
additional cost to the consumers of their products, leading to increase the
cost of the products in the market and complicate the rising inflation rate in
the country.
Mr. Segun Ajayi-Kadir, Director-General, MAN, said this in
reaction to recent announcement to increase electricity tariff from July 1.
According to the Nigerian Electricity Regulatory Commission
(NERC), the increase was in response to the rise of the pump price of premium
motor spirit (PMS) the rise in inflation rate which was at 22.41 per cent, and
a shift in the exchange rate from N441 to N750.
But the MAN Chairman who spoke in an interview with the NEWS
Agency of Nigeria described the planned increase as outrageous
According to him, a 40 per cent tariff increase at this time
would engender higher costs of production, lower profit margin, manufacturing
activities paralysis, lower revenue remittances to 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.
The MAN director general said that manufacturers spent at
least N144.5 billion on sourcing alternative energy in 2022, up from N77.22
billion in 2021, translating to 87 per cent increase in the cost of access to
alternative energy sources.
He said the fact that government itself was owing N75
billion in unpaid electricity bill was indicative of how burdensome the cost of
electricity had become.
“Already, we have power constituting between 28-40 per cent
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.
“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,” he said.
Ajayi-Kadir advised the Federal Government and Nigerian
Electricity Regulatory Commission (NERC) to instead, 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
per cent of electricity consumers were metered to ensure consumption reflective
electricity bill payment.
He also tasked government to formulate electricity policies
that would aid investments in energy industry to increase generation capacities
and usher in large scale production of electricity.
“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,” he said. NAN