Private Sector Calls for Suspension of Electricity Tariff Hike
The Organised Private Sector of Nigeria (OPSN) has called for the suspension of the implementation of the new electricity tariff hike. The OPSN, via a statement on Wednesday in Lagos, said the call was to enable all stakeholders to have meaningful dialogue around the process and methodology of determining electricity tariff.
The statement was signed by the Director-General of the Manufacturers Association of Nigeria (MAN), Mr Segun Ajayi-Kadir, on behalf of the OPSN.
The Federal Government, through the National Electricity Regulatory Commission (NERC), announced an increase in tariff for users under the Band A category, effective April 3.
The new rates mean a hike from N67 per kilowatt-hour to N225 per kilowatt-hour translates to a 241 increase for the users.
Ajayi-Kadir stated that the call for suspension was to allow the OPSN and electricity bodies jointly agreeing on the transparent mechanism required for tariff setting.
He said the OPSN had received numerous complaints from its member-companies on the implications of the recent astronomical increase in electricity tariff without the required and proper consultations with the private sector.
He stated that this sudden increase in the face of inadequate electricity supply was inimical to the competitiveness of Nigerian products and businesses and would definitely exacerbate the impact of high cost of production.
“Meanwhile, the astronomical increase is against the MYTO Order referenced NERC/2023/05, which valued the cost-reflective tariff at N114.8/Kwh (determined using exchange rate of N919.39/$1).
“It also does not reflect the current exchange rate reality that has seen the Naira appreciated by 62.95 per cent over the dollar in the last one month. Naira Skids as FX Turnover, External Reserve Decline
“A closer look at the impact of increase in electricity tariff to N225/kwh (determined using exchange rate of N1463.31/$1) on the cost profile of a medium sized company using 700kw revealed that the firm will need to pay about N1.4 billion per annum (700 x 225 x 24 x 365) for electricity.
“In China, a similar medium-sized company will pay a little over N24 million (700 x 94.14 x 24 x 365). “Obviously, the new electricity tariff is outrageously higher when compared with the going rates in countries with significant manufacturing performance,” he said.
Ajayi-Kadir added that with the new tariff of N225/kwh, Nigeria now ranked third after Germany and United Kingdom on the list of countries with high electricity cost.
He said that what was most worrisome with the Nigerian case is the fact that the electricity to be supplied is not adequate. He added that the increase was coming on the heels of macroeconomic instability, infrastructure deficits, as well as other supply side constraints limiting the performance of the productive sector.
“Truth be told, over 65 per cent of private businesses, especially manufacturing concerns and SMIs, may be forced to close down due to the high electricity tariff.
“The OPSN is constrained to state that the more than 200 per cent increase in electricity tariff at this difficult time is inimical to the survival of our businesses and would lead to unprecedented downturn in the productive sector of the economy.
“It will have negative trickle-down effects and certainly impoverish Nigerians.
“The unwarranted increase will worsen the upward swing in inflation, aggravate the pressure on the disposable income of the average Nigerian and lead to closure of many private businesses.
“The cumulative effect will be an escalation of the current high level of unemployment and insecurity in the country,” he said.
The OPSN comprises MAN, Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Nigeria Employers Consultative Association(NECA).
Others are Nigerian Association of Small Scale Industrialists (NASSI) and Nigeria Association of Small and Medium Enterprises (NASME) representing more than five million businesses in Nigeria.
