Electricity is a critical input in manufacturing processes and has a
significant impact on production costs and product prices. Therefore, it
goes without saying that the incessant increase in electricity tariffs
in Nigeria is hindering the sector’s performance and the economy’s
growth.
Incidentally, no nation can attain significant industrial
development without energy security, which is timely access to
sustainable and cost-effective energy. Sustainable and low-cost energy
supply provides incentives for scale production and competitiveness of
the industrial sector. Based on the critical importance of energy
security in achieving Nigeria’s industrial aspiration, the Power Sector
was privatized in 2013 to improve the scale of
energy supply to the nation, particularly the industries.
Unfortunately,
this particular privatization has not yielded the desired results. It
is widely believed that this is because the operators in the value chain
lack the technical and financial capacity to operate and deliver
optimally. The installed capacity has consistently been around 10,000MW,
and it has not been fully utilized due to the limited capacity of the
GenCos and DisCos to generate
and distribute adequate electricity supply nationwide.
Despite the inability to meet consumer demand, we have witnessed
consistent tariff increases without a commensurate and good-quality
supply. According to NBS, the electricity supply stood at 5,909.83 (Gwh)
in Q2 2023 but reduced to 5,769.52 (Gwh) in Q1 2024 and 5,612.52 (Gwh)
in Q2 2024 when the tariff increase of over 230 percent was implemented.
Thus, the figure indicates a 5.03 percent decrease year over year and
2.72 percent quarter on quarter.
MAN has severally advocated for
an increase in electricity supply from the abysmal average of 4,000MW of
electricity per day for over 200 million people, whereas Nigeria needs
more than 30,000MW of electricity to appreciably meet the growing
electricity demands by businesses and households in the country.
The
proposed increase in electricity tariff is inimical to the
competitiveness of Nigerian products and businesses as it will further
exacerbate the impact of high cost of production, worsen the current
inflationary pressure, aggravate the pressure on the disposable income
of the average Nigerian, increase the unsold inventory of manufacturers,
erode their profit margin, increase unemployment rate and lead to
closure of more private businesses.
The persistent increase in
tariff means that consumers will continue to bear the brunt of the
inefficiency in the electricity value chain. As it stands, manufacturers
are disadvantaged as the increase cannot be transferred to consumers
who are currently battling with low purchasing power.
However, I
am not certain that the Federal Government has reached the conclusion
that the electricity tariff would be increased. I hope not. The advice
would be that the Government should commission a review of the
performance of the DisCos after the last unwarranted increase; conduct a
study on the impact of the increase on the manufacturing sector in
particular, and businesses and households in general; sincerely and
critically interrogate the so-called cost reflective tariff template of
the DisCos, and audit their level of commitment to investment in
distribution infrastructure.
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