Electricity Tariff: Concerns As Private Sector Fears 65% Business Closures

The Organised Private Sector (OPSN) has decried the new tariff of N225/kwh for Band A electricity customers, saying that over 65 per cent of private business-es, especially manufacturing sec-tor and SMEs, may be forced to close down due to the high electricity tariff.

The Association called for the suspension of new tariff implementation to enable all stakeholders have meaningful dialogue around the process and method-ology of determining electricity tariff as well as jointly agreeing on the transparent mechanism re-quired for tariff setting.
It said Nigeria now ranks third after Germany and the United Kingdom on the list of countries with high electricity costs.

The Association, comprising top Business Membership Organisations (BMOs) Manufactures As-sociation of Nigeria (MAN), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigeria Employers’ Consultative Association (NECA), Nigerian Association of Small-Scale Industrialists (NASSI) and Nigerian Association of Small and Medium Enterprises (NASME) representing more than five million businesses in Nigeria stated this in a joint release.

It said that “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 in-crease 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.”

It explained that “a closer look at the impact of increase in elec-tricity tariff to N225/kwh (determined using exchange rate of N1463.31/$1) on the cost profile of a medium sized company using 700 kw revealed that the firm will need to pay about N1.4 billion per annum for electricity. In China, a similar medium sized company will pay a little over N24 million.”

It added that “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.”