A Review of the Nigerian Energy Industry

Manufacturers to shut factories over high electricity bills

26 February 2015, Abuja – Some manufacturers in the country have said that the increase in electricity tariffs will force them to shut down their operations in the near future if development is not urgently addressed.

Electrical sub-station
Electrical sub-station
Electrical sub-station
Electrical sub-station
Different producer groups of the Manufacturers Association of Nigeria on Wednesday said if the Nigerian Electricity Regulatory Commission failed to revert to the old Multi Year Tariff Order, the industrialists would have no option but to down tools.

Speaking at an enlarged stakeholders’ forum in Abuja on the revised MYTO 2.1, the manufacturers argued that the new order had led to an astronomical increase in electricity tariffs, a development they said was capable of crippling their operations because consumers would not be able to absorb the commensurate rise in products’ prices due in an already saturated market.

NERC had announced that following the conduct of a special review, it approved the revised MYTO 2.1, which came into effect on January 1, 2015.

“A major highlight of the MYTO 2.1 is a six-month freeze from January 1, 2015 on tariff increase for residential consumers. The increase in tariffs will only affect non-residential consumers; that is, commercial consumers of electricity,” the Chairman, NERC, Dr. Sam Amadi, had said.

But the Coordinator, Steel Manufacturers Group of MAN, Mr. Felix Okojie, stated that all producers across the country were shocked by the quantum leap in the new electricity tariffs approved by NERC.

Asked what would be the reaction of the manufacturers if NERC failed to revert to the old order, Okojie said, “We will shut down our operations. Tell me what else you expect me to say. If they insist and we cannot pay the bills, then the only option open to us is to close down the factories. And then, more Nigerians will be thrown into the labour market and insecurity will increase.

“I agree with you that the action will be too extreme, but that is why we are asking NERC to rethink because the action they have taken now is completely anti-progress. It doesn’t help the Nigeria Industrial Revolutions Plan; it goes completely contrary to all these concepts.”

He argued that electricity tariffs in the country were among the highest in the world, stressing that most developed and developing nations were considerate of the rates given to consumers.

Okojie said, “China, India, USA, Russia, Angola and some other African countries that have stable electricity pay between N3, in comparative terms, to N21 per Kwh. But here in Nigeria, we don’t have constant electricity and power firms are demanding N28.28 per Kwh.

“We have more darkness than light and yet pay high tariffs, for what? Is it for darkness or for light?”

He explained that most manufacturers had made their long-term projections based on the MYTO order laid out for 2012 to 2017.

“The MYTO 2012 to 2017, which was meant to run for five years, formed the basis of our members’ long-term planning, which NERC’s sudden increase has now seriously interrupted. This is because we were not informed of the revocation of the MYTO order. We consider this sudden action unfair to our members.”

Okojie stated that residential customers were indirectly paying the new tariff despite claims by the commission that they would only begin to pay in July.

He said, “The truth is that all of us are operating the new order because we are either landlords or tenants. You will notice that where you were paying N1,200 before, your January bill will now be about N5,000.

“So, indirectly, they have started taking the money, which they promised that it will be in six months. Why are we fooling ourselves?”

The Executive Chairman, Sunchi Integrated Farms Limited, an Enugu-based firm that specialises in hatchery, feed mills and soya oil refining, Mr. Sunday Ezeobiora, said the new tariffs would ground the company’s operations if not reversed.

Ezeobiora said, “We wish to state that the current increase in tariff by 94.62 per cent for the C2 category as approved for the Enugu Electricity Distribution Company by your commission is beyond our absorption capacity and will halt our operations and render our workers jobless.

“We cannot afford to pay our January 2015 electricity bills based on the new tariff and still remain in business. We, therefore, plead that the implementation of the new tariff order be halted pending wider consolations with agro-allied industries.”

Defending the revised MYTO 2.1, the NERC chairman stated that it was approved because it would help provide clarity as to how prudent costs would be recovered by efficient operators.

Amadi said, “The Electric Power Sector Reform Act, 2015 obligates NERC to ensure that every efficient operator recovers prudent costs of producing and supplying electricity. At the same time, we are also obligated to ensure that tariffs are fair, reasonable and affordable.

“Because the fundamental drivers of costs in this industry – inflation rate, foreign exchange, cost of gas and available quantity – could change quickly; there is a minor review of the tariff structure every six months to re-index the tariff to these changing fundamentals.”

He, however, admitted that the tariffs that businesses and industries were paying for electricity in the country was high and advocated for the production of embedded power by firms that had the capacity to do so.

Amadi added, “Truly, the cost that businesses and industries pay in Nigeria is high. But the highest portion of this cost comes from self-supply of electricity. If power from the grid is stable and adequate, we will see significant decrease in the cost of energy.

“How to increase energy supply to industrial and commercial consumers in Nigeria is the most important and urgent challenge we face.”

– Punch

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