Business

Further electricity hike may result in manufacturing recession, MAN warns

The Manufacturers Association of Nigeria (MAN) has warned that further increase in electricity tarrif as being proposed from July 1, might worsen the economic situation and force the manufacturing sector into recession.

MAN, in a statement issued by its Director-General, Segun Ajayi-Kadir, at the weekend, described as outrageous, the proposed electricity tariff hike, especially for manufacturing since energy already constitutes between 28 and 40 percent in the cost structure of the sector.

“Proposed electricity will increase production costs. Higher electricity tariff will directly increase the cost of production for manufacturers. Already, we have energy constituting between 28 and 40 percent 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,” the association stated.

MAN also believes a hike, as being proposed, will reduce profit margins of manufacturers and reduce their ability to expand operations and create new jobs.

The association added that further electricity hike might decrease the revenue collectable by government since manufacturers’ profitability must have been negatively impacted by such hike.

It also expressed concern about an impending increase in the cost of indigenous products in the market and the rising inflation likely to follow if the hike is implemented.

MAN, therefore, urged the Federal Government and Nigerian Electricity Reputation Commission (NERC) to ensure improvement in electricity generation, transmission and distribution that will lead to adequate and reliable electricity supply in the country, rather than increase tariff on mere 4,000MW.

The manufacturers’ group also called on the government to ensure that at least 90 percent of electricity consumers are metered to ensure consumption-reflective electricity bill payment.

“Government should also formulate electricity policies that will aid investment in energy industry to increase generation capacities that will usher in large scale production of electricity and ensure effective implementation of the recent Electricity Act (2023) that is aimed at increasing the electricity supply in the country,” it added.

It also called on states and private investors to rise up to the challenge by taking advantage of the Electricity Act 2023 to eradicate the energy poverty.

The association also wants the Federal Government to engage in consultations with the nation’s manufacturers, focus on measures that will salvage the sector and halt the trend of shutdown of factories.

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