‘Increase In Tariff Will Push Up Cost And Depress Productivity’

Some Private operators under the umbrella association, the Organised Private Sector in Nigeria (OPSN), are opposed to the proposed increase in electricity tariff from Wednesday .

According to the group, the upward review of tariff will be counterproductive on consumption and productivity.

They argued that any form of increase in electricity tariff in the face of inadequate electricity supply and exorbitant cost of self-generated electricity will further spike the cost of doing business with consequential upward spiral effects on unemployment rate.

The OPSN said at the moment, electricity outages average about 10 hours per day; electricity expenses still constitute about 40 per cent of total cost of production, with the cost of self-generated electricity averaging N119 billion in 2019.

The OPSN is made up of Manufacturers Association of Nigeria (MAN), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigeria Employers Consultative Association (NECA), Nigerian Association of Small and Medium Enterprises (NASME) and Nigerian Association of Small Scale Industrialists (NASSI) made its position known in a statement.

The statement said private operators are already plagued by high cost operating environment arising from poor regulatory environment, macroeconomic asymmetries and high cost of energy, adding that this unfriendly operating environment was responsible for the oscillatory performance of the sector in the past few years.

The OPSN also said the tariff increase is coming at a time private businesses, especially MSMEs are groaning under the pain of injuries inflicted on them by the last economic recession, the prevailing harsh operating environment and the increasing burden of taxes. Besides, the state of readiness in terms of competitiveness for the African Continental Free Trade Area (AfCFTA), which takes off next month, is currently at the lowest ebb.

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The private operators argued that the trajectory of continuous increase in electricity tariff without commensurate improvement in electricity generation, transmission and distribution is not sustainable and would have catastrophic impact on the real sector.

“The increase in electricity tariff is coming also at a time that the Nigerian Electricity Supply Industry (NESI) is pervaded with high level of inefficiency, low investment in strategic electricity infrastructure; majority of consumers are not metered and the billing system is still largely estimated,” they added.

They further argued that an upward review in electricity tariff will worsen the already precarious position of the critical mass of small and medium businesses. Also to feel the heat of the increase in tariff, according to the group, are strategic private sector businesses with high electricity intensity processes.

MAN President Engr. Mansur Ahmed said modern industry competitiveness depends to a great extent on provision of adequate and efficient infrastructure especially electricity supply, noting, for instance, that electricity is a vital input for manufacturing process to the extent that it constitutes up to 40 per cent of the cost of production.

He said increasing the tariff of this core input will have drastic negative effect on the Gross National Product (GNP), GDP, disposable income, consumption, consumer price index, employment, and government revenue from corporate taxation etc.

Private operators insisted that “The proposed tariff increase should be suspended in the best interest of the Nigerian economy.”

They stated that even if electricity tariff cannot be reduced, it should not be increased, reiterating that “Any increase in tariff will reinforce the already high cost of doing business for the private sector and further depress productivity in the manufacturing sector.”

Instead of contemplating an increase in electricity tariff, the OPSN suggested that government, being a major stakeholder in the electricity industry, should concentrate on developing processes and polices to attract significant investment to encourage scale generation with improved transmission and distribution infrastructure in the industry.

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Adapted from The Nation

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Author: Ashogbon Isaiah