By Stanley Onyeka, Lagos
The Organised Private Sector of Nigeria (OPSN), yesterday, called for the suspension of the implementation of the new 200% electricity tariff hike for Band A customers.
The OPSN, in a statement, said: “The OPSN is constrained to state that the more than 200% 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.”
Signed by the Director-General, Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, the OPSN maintained that “…over 65% of private businesses, especially manufacturing concerns and SMIs, may be forced to close down due to the high electricity tariff.”
Therefore, the suspension of implementation, it argued, will enable all stakeholders to have meaningful dialogue around the process and the methodology of determining electricity tariffs.
It said the move will enable parties to jointly agree on the transparent mechanism required for setting the tariff.
Recall that the Nigerian Electricity Regulatory Commission (NERC), recently announced an increase in tariff of N225 per kilowatt-hour (Kwh) up from N67/Kwh for users under the Band A category, effective April 3.
However, the announcement was greeted with widespread outcry, for which the OPSN confirmed it had received numerous complaints from its member companies on the implications of the increment without the required and proper consultations.
The OPSN said this sudden increase, amid inadequate electricity supply, is inimical to the competitiveness of Nigerian products and businesses and would definitely exacerbate the impact of the high cost of production.
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.
Cost analysis
The statement reads further: “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 appreciate by 62.95% over the dollar in the last one month.
“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.”
The OPSN further noted 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, saying it is worrisome as Nigeria suffers from inadequate electricity supply.
It added that the tariff increase comes amid macroeconomic instability, infrastructure deficits, and other supply-side constraints, thereby limiting the performance of the productive sector.
The OPSN comprises MAN, the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA); the Nigeria Employers Consultative Association (NECA); the Nigerian Association of Small-Scale Industrialists (NASSI); and the Nigeria Association of Small and Medium Enterprises (NASME), representing over five million businesses in Nigeria.
