OPSN urges Govt to suspend implementation of new electricity tariff

• Calls for dialogue with stakeholders on transparent mechanism required for tariff setting

The Organised Private Sector of Nigeria(OPSN) comprising top Business Membership Organisations (BMOs), Manufacturers Association of Nigeria (MAN), Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigeria Employers’ Consultative Association (NECA), Nigeria Association of Small Scale Industries (NASSI) and Nigeria Association of Small and Medium Enterprises (NASMEs) representing more than 5 million businesses in Nigeria, has taken due notice of the various reforms initiated by the President Bola Tinubu administration to stabilise the economy, enhance human capital development and increase the tax-to-GDP ratio to 15 percent while enhancing fiscal transparency.

The body in a statement issued commend the efforts of Government in this direction and look forward to an accelerated implementation of the right policies to achieve the set objectives.

It noted that it is against this backdrop and after extensive consultations with their members that they decided to address a recent concerning issue that is threatening the survival of their businesses.

The OPS said that it has received numerous complaints from its member-companies on the implications of the recent astronomical increase in electricity tariff by the Nigerian Electricity Regulatory Commission (NERC) for Band A customers without the required and proper consultations with the private sector.

The statement read, “This sudden exponential increase in the face of inadequate electricity supply, is inimical to the competitiveness of Nigerian products and businesses and will definitely exacerbate the impact of high cost of production. 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 percent over the dollar in the last one month.”

According to the statement, the OPSN did a comparative analysis of electricity cost of Nigeria and some other countries, adding “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 N1.4b per annum (700 x 225 x 24 x 365)for electricity. In China, a similar medium sized company will pay a little over N24m (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.

“In the United states of America (USA), United Kingdom, Germany, France, China, India, South Africa, Ghana and Benin Republic, prevailing electricity cost per kilowatt hour are $0.1545, $ 0.3063, $0.53,$0.0573,$0.076, $0.068, $0.0999, $0.123 and $0.195 respectively.

“The conversion values of the afore-mentioned electricity cost in Naira are N191.38, N379.41, N656.50, N70.98, N94.14, N84.23, N64.53, N152.36 and N125.95 respectively.”

OPSN, highlighted that with the new tariff of N225/kwh, Nigeria now ranks third after Germany and United Kingdom on the list of countries with high electricity cost, adding that what is most worrisome with the Nigerian case is the fact that the electricity to be supplied is not adequate.

They pointed out that the increase is coming on the heels of macroeconomic instability, infrastructure deficits, as well as other supply side constraints limiting the performance of the productive sector and lamented that over 65 percent of private businesses, especially manufacturing concerns and SMIs, may be forced to close down due to the high electricity tariff.

The OPSN disclosed that in consideration of the above and from compelling primary data and submissions from member-companies, they are constrained to state that the more than 200 percent increase in electricity tariff at this difficult time is inimical to the survival of their businesses and would lead to unprecedented downturn in the productive sector of the economy.

According to the body, it will have negative trickle-down effects and certainly impoverish Nigerians, stressing that “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.”

Consequently, the OPSN has called on the government for the suspension of the implementation of the new tariff to enable all stakeholders have meaningful dialogue around the process and methodology of determining electricity tariff as well as jointly agreeing on the transparent mechanism required for tariff setting.