The Manufacturers Association of Nigeria (MAN) has raised a serious alarm over the recent 250% hike in electricity tariffs, warning that no manufacturer in Nigeria can survive such a drastic increase. The tariff hike, approved by the Nigerian Electricity Regulatory Commission (NERC) for electricity distribution companies (DisCos), has placed an enormous burden on the manufacturing sector, which relies heavily on electricity to operate.
Segun Ajayi-Kadir, Director General of MAN, made this statement during a media briefing ahead of the association’s 2024 Annual General Meeting (AGM) held in Lagos. Ajayi-Kadir expressed deep concern about the potential impact of the tariff hike on the manufacturing industry, which is already struggling with other economic challenges.
The tariff increase has not gone unchallenged. MAN took legal action against NERC and the DisCos in a bid to reverse the decision, but the case was recently struck out by a Federal High Court. The court ruled that the case was an abuse of the court process, leaving manufacturers in a difficult position.
Ajayi-Kadir described the court ruling as a setback but emphasized that MAN is not giving up the fight. He highlighted that many manufacturers are anxious about the future of their businesses. “We are consulting with our counsel and members,” he said, noting that the next course of action is being carefully considered.
Ajayi-Kadir urged the federal government to extend the same tariff discounts it granted to other critical sectors, such as universities and hospitals, to manufacturers. Universities and hospitals recently received a 50% reduction in their electricity tariffs, recognizing the essential services they provide to the country.
“If the government found it necessary to offer a 50% discount to universities and hospitals, it shows that even the authorities understand the severity of the tariff hike. We are asking for the same consideration,” he said.
He argued that the manufacturing sector is just as vital to Nigeria’s economy as other sectors that received the tariff relief. “Manufacturers create jobs, pay taxes, and contribute to improving Nigeria’s exports. We deserve the same support,” Ajayi-Kadir stressed.
The electricity tariff hike comes at a time when many manufacturers are already grappling with the high cost of doing business in Nigeria. Rising inflation, currency depreciation, and the removal of fuel subsidies have all contributed to increased operational costs, making it difficult for companies to stay afloat.
Ajayi-Kadir painted a grim picture of the current situation, warning that many manufacturers may be forced to shut down if the government does not intervene. “Some members are saying that we should just shut down and allow our workers to go home. Maybe then the government will listen,” he said.
The prospect of shutdowns raises fears of massive job losses across the country, as the manufacturing sector employs millions of Nigerians. Ajayi-Kadir warned that without urgent action, the tariff hike could lead to widespread unemployment, which would further exacerbate the country’s economic woes.
Electricity is a critical input for manufacturing. From running machinery to powering production lines, manufacturers rely on a steady and affordable supply of electricity to keep their operations running smoothly. In Nigeria, however, electricity supply has long been a problem, with manufacturers often relying on expensive diesel generators to compensate for frequent power outages.
The recent 250% increase in electricity tariffs is a devastating blow to manufacturers who are already burdened by high energy costs. For many businesses, electricity accounts for a significant portion of their operating expenses. A sudden increase in tariffs without any warning or adequate compensation could lead to higher production costs, reduced profitability, and ultimately, the collapse of many manufacturing firms.
The potential collapse of the manufacturing sector due to the tariff hike would have ripple effects across the Nigerian economy. The sector is a key driver of economic growth, contributing to the country’s gross domestic product (GDP) and providing much-needed jobs.
Manufacturing also plays a critical role in Nigeria’s efforts to diversify its economy away from oil. With global oil prices fluctuating and oil revenues no longer as reliable, the federal government has been pushing for greater investments in non-oil sectors, including manufacturing. However, the tariff hike threatens to undo much of the progress made in recent years.
Ajayi-Kadir warned that the tariff hike could also impact Nigeria’s ability to compete in international markets. “If our production costs rise because of higher electricity tariffs, we will struggle to compete with manufacturers in other countries where electricity is cheaper,” he said. This, he explained, could lead to a decline in exports, further hurting the country’s economy.
The Manufacturers Association of Nigeria is not asking for electricity tariffs to be scrapped entirely. Instead, they are calling for a fair review of the current rates. MAN argues that a more gradual increase in tariffs, coupled with improved electricity supply, would be a more reasonable approach.
“We understand that electricity tariffs need to be adjusted from time to time, but a 250% increase at once is simply not sustainable,” Ajayi-Kadir explained. He called on the government to work with manufacturers to find a solution that ensures the sustainability of the sector while also addressing the financial needs of the electricity distribution companies.
