By Charles Nwaoguji
Manufacturers Association of Nigeria (MAN) has kick against increase in electricity tariff by the Federal government.
According to the Director General of MAN, Mr. Segun Ajayi-Kadir, the adjustment of N2.00 to N4.00 per kilowatt per hour of electricity, effective January 1, 2021 are not welcome because of the economy situation in the country.
Ajayi-Kadir, who stated this in an interview with Skybirdnews Group, recently in Lagos, said that this increase in tariff, which is coming at the commencement of the African Continental Free Trade Agreement (AfCFTA) and barely 3 months after the huge increment was imposed on electricity users in October 2020, is not manufacturing friendly.
“It appears to be insensitive to the prevailing precarious situation of the sector. The increase is coming at a wrong time and would clearly reverse the little gains in the recent past,” he stated.
He explained that this is against the background of prevailing harsh operating environment, the increasing burden of taxes, the enormous spending on self-generated electricity up to the tune of N70billion (excluding hundreds of billions Naira spent on settling monthly electricity bills) and the ailing state of a sector that is just recovering from a lockdown occasioned by the ravaging Covid-19 pandemic.
“We are worried that the recent increase in price of electricity will have overwhelming negative impact on the Nigerian economy, especially the manufacturing sector, he said.
He noted that if go ahead to increase the taiff it will trigger reverse-multiplier effect as cost of production would escalates and the headways already made in the sector would be eroded. This is because most of MAN-member companies are classified in the ‘D’ categorization (D1, D2 and D3) where tariff is the highest.
He observed that the manufacturing sector is already plague with a high cost operating environment emanating principally from high cost of energy poor regulation.
He said that this poor condition is responsible for the oscillatory performance of the sector.
“ It is therefore important that any policy that will add to the already bloated cost of production in the sector should be avoided. One would normally expect that before embarking on this outrageous increase in electricity tariff, its impact on the manufacturing sector and the economy at large would have been properly evaluated to mitigate a crowding out effect on the economy in general and the productive sector in particular,” he pointed out.
He said that government should continue to provide stimulus packages that will aid the recovery of the sector and avert the shutdown of factories nationwide with multiplier effect on the employment of about 5 million workers.
“We expect that NERC as the regulator will ensure improved electricity generation, transmission and distribution that will lead to adequate and reliable electricity supply in the country rather than squeezing the mere 4000MW to meet all revenue needs of key sharing stakeholders. We equally expect NERC to make regulations that will ensure that 80% of consumers are metered to ensure consumption reflective payment; aid inflow of investment in the energy industry in order to increase generation capacities and usher in large scale production of electricity. The recent absurd increase does not support these desirable propositions,” he added.