Tariff: Organised Private Sector warns of looming collapse of manufacturing industr
From Suleiman Amagbor, in Lagos
The Organised Private Sector in Nigeria (OPSN), Wednesday, warned of an imminent economic catastrophe following what they called the over 200 percent masked increase in electricity tariff that was approved by the Nigerian Electricity Regulatory Commission (NERC) for Band A consumers.
OPSN told journalists that the fate of over 5 million businesses in Nigeria it represents was not taken into considerations nor were they consulted before the decision was taken amidst the current volatile situation that has put businesses on the edge.
While it commended the various reforms initiated by the President Bola Tinubu administration to stabilise the country’s economy, it noted that the reforms will enhance human capital development and increase the tax-to-GDP ratio to 15 percent while enhancing fiscal transparency.
OPSN disclosed that it members included top Business Membership Organisations (BMOs) such as the Manufacturers Association of Nigeria (MAN), the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigeria Employers’ Consultative Association (NECA), Nigerian Association of Small Scale Industrialists (NASSI), and the Nigerian Association of Small and Medium Enterprises (NASME).
A preliminary position on the increase in electricity tariff by the body made available to the media in Lagos indicated that the body commended the efforts of the government in stabilizing the economy while looking forward to an accelerated implementation of the right policies to achieve the set objectives.
But it said it has received numerous complaints from its member-companies on the implications of the recent astronomical increase in electricity tariff by the NERC for Band A customers without the required and proper consultations with the private sector.
It explained that the sudden exponential increase in the face of inadequate electricity supply is inimical to the competitiveness of Nigerian products and businesses stating that will definitely exacerbate the impact of high cost of production.
The body of manufacturing and other business concerns in Nigeria queried that 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) and affirmed that the new increased does not reflect the current exchange rate reality that has seen the Naira appreciated by 62.95 percent over the dollar in the last one month.
According to its comparative analysis of electricity cost around the world, the OPS body revealed Nigeria now ranks third after Germany and the United Kingdom on the list of countries with high electricity cost globally.
The document noted that “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 N1.4b per annum (700 x 225 x 24 x 365) for electricity.”
It showed that “In China, a similar medium sized company will pay a little over N24m (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.”
The breakdown also revealed that “In the United states of America (USA), United Kingdom, Germany, France, China, India, South Africa, Ghana and Benin Republic, prevailing electricity cost per kilowatt hour are $0.1545, $ 0.3063, $0.53,$0.0573,$0.076,$0.068, $0.0999, $0.123 and $0.195 respectively.”
“The conversion values of the afore-mentioned electricity cost in Naira are N191.38, N379.41, N656.50, N70.98, N94.14, N84.23, N64.53, N152.36 and N125.95 respectively. Clearly, with the new tariff of N225/kwh, Nigeria now ranks third after Germany and the United Kingdom on the list of countries with high electricity cost, ” It said.
It further lamented that “What is most worrisome with the Nigerian case is the fact that the electricity to be supplied is not adequate. Also, the increase is 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 percent of private businesses, especially manufacturing concerns and SMIs, may be forced to close down due to the high electricity tariff.”
According to the body, “In consideration of the above and from compelling primary data and submissions from member-companies, the OPSN is constrained to state that the more than 200 percent 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.”
The body affirmed that “Consequently, the OPSN hereby calls for the suspension of the implementation of the new tariff to enable all stakeholders have meaningful dialogue around the process and methodology of determining electricity tariff as well as jointly agreeing on the transparent mechanism required for tariff setting.”
