The hike in electricity tariffs has sent shockwaves through Nigeria’s manufacturing sector, leading to the closure of over 300 companies and the loss of 380,000 jobs since April 2024, according to the Manufacturers Association of Nigeria (MAN).
MAN voiced deep concerns over the crippling impact of the tariff increase, painting a grim picture of the nation’s economy.
Senator Ahmed Abdulkadir, speaking on behalf of MAN, delivered this stark revelation at an investigative hearing organized by the Joint Committees on Power, Commerce, National Planning & Economic Development, and Delegated Legislation. The hearing was held in Abuja, drawing attention to the dire straits faced by the manufacturing industry following the tariff hike.
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In a controversial move In April, the National Electricity Regulatory Commission (NERC) increased electricity tariffs from N66 to N225 per kilowatt (kW) for Band A customers, who receive 20 hours of electricity daily. This significant jump in costs has been a heavy blow to manufacturers, who already contend with a myriad of operational challenges.
Abdulkadir pointed out that electricity costs now constitute about 40% of production overheads for manufacturers. This has severely affected their financial viability, leading to widespread job losses and factory shutdowns.
One striking example he cited was a company that had to slash its workforce from 360,000 to a mere 5,000 employees due to the exorbitant cost of doing business in the current economic climate.
The senator did not hold back in criticizing NERC’s process, asserting that the supplementary order of April 3, 2024, which raised the tariff, was never properly communicated to the public. He accused the distribution companies (DisCos) of neglecting the guidelines for consumer consultation before applying for the increase, a move he deemed unfair and detrimental to stakeholders.
“Contrary to NERC’s position, we are aware that the tariff hike was not adequately publicized, and DisCos failed to adhere to required consultation procedures,” Abdulkadir stated. He added that this lack of transparency and consultation has only fueled the frustration and resistance among manufacturers and the general public.
In defense of the tariff hike, Minister of Power Adebayo Adelabu argued that the Federal Government could no longer sustain the N3 trillion subsidy for electricity. He highlighted that the removal of subsidies for Band A customers was essential to prevent the government from accruing unsustainable debts.
“The decision to increase tariffs was necessary. Without it, the expected subsidy would have been about N3 trillion, which the government simply cannot afford,” Adelabu stated.
The minister further emphasized that even with the increased tariffs, Nigeria still offers some of the cheapest electricity rates in sub-Saharan Africa. Also, he said that the cost of electricity remains more affordable than other power sources such as premium motor spirit and diesel.
“Band A is cheaper compared to other sources of generating power. It is almost 50 percent cheaper to connect to Band A of the national grid than to run on fuel and diesel,” he said, arguing that businesses benefit more from grid connections than generating power individually using fuel or diesel.
The tariff hike has exacerbated the already dire economic conditions faced by Nigerian businesses, especially the informal sector. With Nigerians grappling with poor earnings and depleted spending power, it has become increasingly difficult for citizens to cope with higher utility bills.
Deputy Speaker of the House of Representatives Benjamin Kalu acknowledged these hardships during a public hearing organized by the House of Representatives Joint Committee on Power, Commerce, National Planning, and Delegated Legislation.
“The sharp increase in electricity tariffs further worsens the economic predicament of the masses. Higher utility bills have ripple effects, increasing operational costs for businesses and leading to higher prices of goods and services,” Kalu stated.
The public outcry has also taken a legal turn. A high court in Lagos on Tuesday issued an interim order preventing NERC and ten DisCos from implementing the new tariffs. This decision followed a suit filed by MAN, challenging the tariff hike.
Judge Lewis Allagoa granted the order, restraining the DisCos and NERC from taking any further steps, including disconnecting power supply until the case is resolved. The court has scheduled a hearing for June 24 to further deliberate on the matter.
The economy is broken, the leadership is decoupled from the citizens, so all you are left with are discordant tones everywhere.
What do we really want in Nigeria, production anchored economy or consumption fueled economy? Each one has its own playbook. What is not profitable is leaving everything in limbo, and hoping that at some point all will be well.
In places where cost of goods and services are high, you must have a remuneration system that can make those high costs of goods and services still affordable. But in Nigeria’s case, you have a situation where wages are meagre, yet you have prices of basic items over the roof. You are essentially turning everyone into a potential criminal when such is the case, and the consequences are unpleasant.
Once Nigeria clearly communicates what it wants, then options and how to go about them will be made available. For now it’s just a matter of wandering in wonder.