Manufacturers Association of Nigeria (MAN) have reported a significant increase in their expenditure on alternative energy sources.
According to MAN, the expenditure rose from N77.22 billion in 2021 to N144.5 billion in 2022, indicating an 87% increase in the cost of accessing alternative energy.
Consequently, MAN has strongly opposed the planned electricity tariff increase set to take effect from July 1, considering it to be outrageous.
Segun Ajayi-Kadir, the Director-General of MAN, expressed concerns about the lack of competitiveness in the real sector due to high costs associated with generating power from alternative sources.
He emphasized that a 40% tariff increase at this time would result in higher production costs, reduced profit margins, hindered manufacturing activities, and lower revenue contributions to the government, among other negative impacts.
Ajayi-Kadir highlighted the longstanding challenge faced by manufacturers in Nigeria, as they have had to rely on alternative energy sources due to the absence of stable, affordable electricity supply.
However, he lamented that even the available alternative energy sources, such as diesel, have become excessively expensive. The fact that the government itself has unpaid electricity bills totaling N75 billion reflects the burden of electricity costs.
The MAN Director-General pointed out that power already accounts for 28-40% of the cost structure in energy-intensive manufacturing industries, such as metal processing, heavy machinery, and chemicals manufacturing.
An increase in electricity tariffs would erode manufacturers’ profit margins, hinder their expansion plans, and limit job creation.
Ultimately, the additional costs would be passed on to consumers, leading to higher product prices in the market and exacerbating the country’s inflation rate.
Furthermore, the competitiveness of locally produced goods would suffer as they become less competitive compared to imported alternatives.
Ajayi-Kadir suggested that instead of raising tariffs, the Nigerian government and the Nigerian Electricity Regulatory Commission (NERC) should focus on improving electricity generation, transmission, and distribution to meet the revenue requirements of the electricity supply industry stakeholders.
He emphasized the importance of ensuring that at least 90% of electricity consumers are metered to enable consumption-reflective billing.
Additionally, he urged the government to formulate policies that promote investment in the energy sector, increase generation capacities, and support large-scale electricity production.
MAN’s expectation is that the government will engage in extensive consultations with manufacturers and implement measures to support the sector, preventing further factory closures and the subsequent negative effects on employment and the overall economy.
They caution against introducing burdensome measures that could further suffocate the manufacturing sector and the wider economy.