• Consumers to pay more for electricity from January 2022
• ‘Electricity now represents 80% production cost’
• 20 per cent of industries in A’Ibom, C’River have shut down
• Households lament frequent hikes
• MAN calls for urgent intervention
With an average of about N70 billion spent on alternative energy, yearly, by local manufacturers due to poor power supply, many industrial firms and businesses in Southeast and South-south are struggling to sustain their operations, with many already suspending production, a survey by The Guardian has revealed.
According to the operators, the high cost of electricity is taking a toll on their businesses, as manufacturers allege that distribution companies and their cohorts are frustrating the eligible customer initiative.
Similarly, efforts to shift to gas consumption as an alternative source to automotive gas oil (AGO), otherwise known as diesel, have resulted in higher costs of equipment migration and inadequate infrastructure to transport gas to factories.
With operating costs already near 80 per cent in some instances, the pass-on effect is already being felt by consumers in the form of a hike in the price of goods and essential commodities.
Indeed, the high cost of operations followed adjustments in tariff by the Federal Government and abuse of estimated billing by distribution companies.
While the confidence index of local manufacturers in the economy improved in the first half of the year, confidence remains extremely low in the Cross River and Akwa-Ibom regions of the country, according to the latest survey conducted by the Manufacturers Association of Nigeria (MAN).
Federal Government had, through the Nigerian Electricity Regulatory Commission (NERC), designed the Multi-Year Tariff Order (MYTO) in 2015 and the Minimum Remittance Order for the Year 2019, which implementation began in January 2021.
President Muhammadu Buhari had approved an electricity tariff increase, effective September 1, 2020, insisting it was inevitable.
Six months after the September approval, NERC began to enforce another new Multi-Year Tariff Order (MYTO), increasing electricity bills by over 50 per cent across the country, just as Nigerians were yet to come to terms with the new increase in electricity tariff.
Local manufacturers noted that the adjustment of N2.00 to N4.00 per kilowatt per hour of electricity by the NERC came at a wrong time when Nigerians are battling with the harsh operating environment.
While hikes by regulatory agencies were meant to ensure that “licensees finance their activities and make a reasonable profit for efficient operations” as stipulated in the Act, the agencies seem to have failed to “ensure that prices charged by licensees are fair to customers” as also stipulated in the same Act, that is if the outcry by consumers in the two regions is anything to go by.
Their cries came even while licensees are yet to begin to implement a new and latest tariff announced by the government, which was scheduled to take effect this month under the Service-Based Tariff (SBT) programme that began last year.
MEANWHILE, with plans to end the electricity subsidy from next year, Nigerians would have to pay more for the commodity under a new tariff arrangement to be unveiled by the Federal Government. The Federal Government reiterated the decision during a stakeholders’ engagement meeting organised by the Nigerian Electricity Commission (NERC) in Lagos. The government had pegged most of its subsidy payments in the electricity sector at N30 billion monthly.
Vice President Yemi Osinbajo had at the opening of the 14th Nigerian Association for Energy Economics (IAEE) conference in Abuja, recently, said the government expected the electricity sector to generate its rere for Transparency & Accountability in the Energy Sector, Abel Godson, stated that, “with the deteriorating nature of electricity supply in the country, coupled with a deteriorating and ageing infrastructure within the electricity network, government’s pre-occupation should be about stabilizing the market, and not tariff hike.”
IN Anambra State, especially around Awka and Onitsha, the Director-General, Awka Chamber of Commerce, Agulue Valentine, observed that factories and businesses faced terminal situations.
Describing Anambra as an industrial state, with very industrious people, he emphasised that every cottage factory in the state operates with electricity and spends nothing less than N80,000 monthly on electricity bills.
He recalled that around June, the Awka Chamber of Commerce carried out an assessment of industries, spanning manufacturing, printing, among others.
He said: “We found that out of about 200 places we visited, power was the main issue, especially after the COVID-19 pandemic. About 60 businesses in the area surveyed had shut down and their workers retrenched.”
Around Nibo and Agu Awka of Anambra State, there exist clusters of cottage industries operated by young entrepreneurs. According to Agulue, their usual complaint is the high cost of electricity.
“The tariff is now another hydra-headed monster rearing its ugly head up. Established industrialists find it hard to cope, where lies the hope of young entrepreneurs.
“Many factories have folded as a result of high electricity cost, especially the start-ups, of which a great majority are young entrepreneurs.
“Some of the major negative outcomes are poor productivity and high cost of goods and services. When somebody spends much to power equipment and machines used in the production of goods, the likely tendency is that he will increase prices to cover the cost. Also, when factories are over billed, retrenchment of workers becomes a possibility because paying them will be an uphill task,” he said.
Sizeable factories, according to him, get bills not less than N50,000 per month. These are factories with a working capacity of no fewer than fifty direct workers.
The head of an engineering firm in Awka, who simply identified himself as Mr. Ibeh, described electricity cost as alarming and feared it could send him out of business.
“Powering machines with electricity is now costly due to high bills, and alternative power source, like fuel (petrol), is not cheaper. I spend about N25,000 monthly on fuel compared to N15,000 I paid 18 months ago, and electricity bills is about N30,000 monthly.”
He called on government and power management authorities to ameliorate their plight.
Similarly, an Onitsha-based baker, who would only give her name as Mrs Amaka, corroborated claims that electricity bills had become unbearable, leading to increase in prices of products. She said: “Cost of monthly electricity bills (estimated bills) hovers between N24,500 and N30,000 monthly while we still spend almost same amount on fuel for the period they failed to supply light.”
MANUFACTURERS Association of Nigeria, Cross River and Akwa Ibom states branch identified high cost of tariff and epileptic power supply as major reasons some companies in the states have folded up.
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