….Says it “ll worsen upward swing in inflation
CHIGOZIE AMADI
The Organised Private Sector in Nigeria (OPSN) has called on the federal government to suspend the over 200 per cent masked increase in electricity tariff.
OPSN in a statement tagged ‘Preliminary Position of the Organized Private Sector (OPSN) on the over 200 per cent masked increased Electricity Tariff’ said 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.
Also, OPSN said the suspension will 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.
According to OPSN, the 200 per cent hike, will have negative trickle-down effects and certainly impoverish Nigerians, adding that the cumulative effect will be an escalation of the current high level of In consideration of the above and from compelling primary data and submissions from member-companies.
The OPSN further noted that it is constrained to state that the more than 200 per cent increase in electricity tariff at this difficult time is inimical to the survival of businesses and would lead to unprecedented downturn in the productive sector of the economy.
“The OPSN 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.
“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 appreciated by 62.95 percent over the dollar in the last one month,” the Group said.
Speaking further, the OPSN maintained that 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 N1.4 billion per annum (700 x 225 x 24 x 365)for electricity.
Also, the OPSN noted that 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.
The OPSN recalled that 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.
Clearly, 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. What is most worrisome with the Nigerian case is the fact that the electricity to be supplied is not adequate.
Also, 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.
Truth be told, over 65 per cent of private businesses, especially manufacturing concerns and SMIs, may be forced to close down due to the high electricity tariff.
The OPSN comprises of top Business Membership Organisations (BMOs) Manufacturers Association of Nigeria (MAN), NACCIMA, NECA, NASSI and NASME, represents more than 5 million businesses in Nigeria, and 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-Gross Domestic (GDP) ratio to 15 per cent while enhancing fiscal transparency.
