The Manufacturers Association of Nigeria (MAN) has passed a damning verdict on Nigerian power sector, nearly 12 years after the generation and distribution segments were privatised.
The manufacturers declared the exercise unfruitful, even as Nigeria requires 30,000MW of electricity to appreciably meet the growing electricity demand.
MAN said beneficiaries of the privatisation lacked the technical and financial capacity to operate and deliver power optimally.
MAN made the declaration yesterday in a public statement that decried the incessant increase in electricity tariff, which it said had hindered the performance of the manufacturing sector and growth of the economy.
The statement signed by Mr. Segun Ajayi-Kadir, the director-general of MAN, urged the government to commission a review of the performance of power Distribution Companies (DisCos) after the last unwarranted increase.
It also asked government to conduct a study on the impact of the increase on the manufacturing sector, in particular, and businesses and households, in general
Ajayi-Kadir urged the government to 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.
He emphasised that electricity was a critical input in manufacturing processes, with significant effect on production cost and prices of products.
The statement said,
“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.”
Ajayi-Kadir pointed out that the Nigerian power sector’s installed capacity, put around 10,000 megawatt (MW), had not been fully utilised due to the limited capacity of the power generating companies (GenCos) and DisCos to generate and distribute adequate electricity nationwide.
He said,
“Despite the inability to meet the consumer demand, we have witnessed consistent increase in tariff without a commensurate and good quality supply.
“According to the 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 per cent was implemented.
“Thus, indicating 5.03 per cent decrease year-on-year and 2.72 per cent quarter-on-quarter.”
According to him, MAN has severally advocated increase in electricity supply from the abysmal average of 4,000MW of electricity per day for over 200 million people.
He said Nigeria needed more than 30,000MW of electricity to appreciably meet the growing electricity demand by businesses and households in the country.
Ajayi-Kadir also advised the government against yielding to any proposed increase in electricity tariff because it would be “inimical to the competitiveness of Nigerian products and businesses”.
He said such increase would also further exacerbate the effect 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 unemployment rate, and lead to closure of more private businesses.
The MAN director-general stated, “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.
“However, I am not certain that the federal government has reached the conclusion that electricity tariff would be increased. I hope not.”
According to MAN, it goes without saying that incessant increase in electricity tariff in Nigeria is hindering the performance of the manufacturing sector and growth of the economy.
It said, “No nation can attain significant industrial development without energy security, which is timely access to sustainable and cost-effective energy.”
MAN added that “sustainable and low-cost energy supply provides incentives for scale production and competitiveness of the industrial sector”.
