Manufacturers Association of Nigeria (MAN) on Tuesday expressed grave concern over the ripple effects of the recent hike in electricity tariff which has resulted into closure of over 300 companies and 380,000 job losses over the past two months.
Senator Ahmed Abdulkadir who spoke on behalf of MAN in Abuja, during the investigative hearing into organised by the Joint Committees on Power, Commerce, National Planning & Economic Development and Delegated Legislations, observed that In fact, electricity related expenses of a manufacturing concern constitute about 40% of the production overhead.
Worried by the decking fortune of the manufacturing/real sector of the Nigerian economy, he underscored the urgent need for the present administration to address the rising case of insecurity, as more workers may be disengaged due to high cost of doing business occasioned by the astronomical hike in electricity tariff.
According to him, one of the companies which employed about 360,000 workers has drastically reduced its workforce to about 5,000 due to the present economic realities.
He explained that the Association is only aware of the initial case hearing held sometime in 2023 for a 40% increase in the electricity tariff rate and not an astronomical increase of over 200% targeted at 15% of the NERC’s customers including major stakeholders of the Nigerian economy today.
“Contrary to the position of NERC, we are aware that the Supplementary order of 3rd April 2024 which increased the electricity tariff rate from N68 to N225 per Kwhr was never brought to the notice of the public as noted by NERC,” Senator Abdulkadir noted.
He also alleged that the Discos had surreptitiously failed to comply with the Guidelines for consumer consultation before applying to NERC for the increase of the electricity tariff rate.
In his address, Minister of Power, Mr. Adebayo Adelabu disclosed that the introduction of Band A which has higher tariff has reduced electricity subsidy to N1 trillion from approximately N3 trillion.
Mr. Adelabu explained that without an increase in electricity tariffs, the subsidy would have surged to about N3 trillion, a figure the government could not afford.
While presenting NERC’s position, Mr. Sanusi Garuba disclosed that energy invoices submitted by the DISCOs was N260 billion per month, while the GENCOs pay the sum of N20 billion.
According to him, the 2023 fiscal year closed with the electricity subsidy of N460 billion as a result of GENCOs refusal to pay for the gas supply.
He maintained that the change in government’s economic policy as announced by the current administration in May 2023 which led to the fuel subsidy removal, hike in foreign exchange, among others have significant correlation with the hike in electricity tariff.
While noting that the N240 billion electricity subsidy per month in 2024 fiscal year is unsustainable, he noted that the country cannot afford the N2.8 trillion for this year.
According to him, the only budgetary provisions in the 2024 Appropriation Act stands at N450 billion.
While declaring the hearing open, Speaker Tajudeen Abbas who was represented by his Deputy, Hon. Benjamin Kalu affirmed that the hike in the electricity tariff “has not been well-received by our citizens. Numerous voices, including organized labor and industry experts, have voiced their strong opposition to this decision.
“The fears expressed by many are valid – that such a sharp increase in electricity tariffs will only exacerbate the economic hardships already faced by our people. There are genuine concerns that higher utility bills resulting from this tariff hike could have a ripple effect on operational costs for businesses, potentially leading to increased prices for goods and services.”
Speaking earlier, chairman, House Committee on Power, Hon. Victor Nwokolo explained that the special committee was set up pursuant to a resolution of the House approving an investigation into the circumstances and rationale for the recent tariff review announced by the Nigerian Electricity Regulatory Commission.
According to him, “NERC as regulator of the Nigerian Electricity Supply Industry (NESI) approved a request by the eleven distribution companies to increase tariff for the so-called Band A customers from N64 to N225 per kilowatts hour. NERC announced that by this new tariff, customers in Band A would be receiving at least 20 hours of electricity supply everyday.
“Since this announcement, we have received a lot of complaints about misgivings on both the process and the substance of the regulatory action of NERC.
“Many of the complaints relate to the lack of consultation by the regulator as required by law before approving the increase. Others relate to the lack of 20 hours of electricity supply as promised by the regulator which has not been delivered.”
