The Manufacturers Association of Nigeria (MAN) has condemned the proposed increase by 40% in electricity tariff from July 1, 2023, describing it as outrageous, adding that the move could sound the death knell for the small and medium-sized enterprises (SMEs) in the country.
In a statement, the Director General, MAN, Segun Ajayi-Kadir, warned that the government should avoid introducing burdensome measures that will further strangulate the manufacturing sector and the whole economy.
His words: "In the last 8years, electricity tariff has been increased by 186% . The fact that government itself is owing N75 billion in unpaid electricity bill is indicative of how burdensome the cost of electricity has become.
"Therefore, it is highly concerning for manufacturers to witness the electricity tariff skyrocketing beyond the present embattling high prices, starting July 1.
"A 40% hike at this time is simply outrageous."
He added that a further rise in electricity tariff could lead to: "Increase the cost of production for manufacturers. Already, we have power constituting between 28-40% in the cost structure of manufacturing industries. You can imagine the impact on manufacturing industries that are energy-intensive such as metal processing, heavy machinery, and chemicals manufacturing.
"Erode the profit margin of the manufacturers and reduce their ability to expand operations and create new jobs.
"High probability of activities paralysis among small and medium-sized enterprises (SMEs) who are unable to accommodate the higher price.
"Reduce the manufacturers’ profitability and by extension the quantum of taxes and fees payable to the three tiers of government. Manufacturers remain the largest income taxpayer in the country. Therefore, in the event of poor income generation due to high costs of production, the government purse will suffer.
"Increase the cost of the products in the market and complicate the rising inflation rate in the country.
"Reduce the purchasing capability. One of the resulting effects is the fall in demand and recession of manufacturing activities over time.
"The high cost of the products will make locally produced items less competitive, when compared with imported alternatives. This is also true of exports, as Nigeria products may find it more difficult to penetrate foreign markets. Such a move will restrict our exports earnings because it will be impossible to compete with counterparts in the global trading.
"Some manufacturing industries may consider shifting production to other economies with lower electricity tariffs and guaranteed availability.
On manufacturers' expectations, Ajayi-Kadir said: "The expectation of the manufacturers is that the Federal Government and NERC will ensure improvement in electricity generation, transmission and distribution that will lead to adequate and reliable electricity supply in the country, rather than increasing the tariff on the mere 4000MW to meet all revenue needs of stakeholders in the electricity supply industry.
"That government will engage in extensive and intensive consultations with the manufacturers; focus on measures that will salvage the sector and halt the trend of shutdown of factories, knowing the implications and the multiplier effects on employment and the economy. Care should be taken to avoid introducing burdensome measures that will further strangulate the manufacturing sector and the whole economy."
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