…warns of impact on households, businesses
Members of the organised private sector (OPS) have faulted the Federal Government’s approval of hike in electricity tariff, effective January 1, 2021, which, they said, will further impoverish the generality of Nigerians and businesses that are yet to recover from the COVID-19 shock. Nigerians were again shocked yesterday when the Nigerian Electricity Regulatory Commission (NERC) released a statement to this effect.
The OPS, which spoke to New Telegraph, include the Manufacturers Association of Nigeria (MAN) and Lagos Chamber of Commerce and Industry (LCCI). President of MAN, Mansur Ahmed, said that the new electricity tariff would be monumentally challenging for business owners, manufacturers, MSMEs, households and the Nigerian economy in general at this period of challenging times in the country caused by COVID-19.
Ahmed said: “We acknowledge the postponement of the planned hike in electricity tariff by the power distribution companies in the first quarter of 2021. “We understand that the upward review of power tariff is inevitable due to the rising cost of electricity generation in the country.
“Current tariffs represent 60 per cent of actual cost-reflective tariff, while the shortfall is being covered by the Federal Government through subsidies. “Electricity supply is being challenged by inappropriate tariffs, which undermines the economics of investment in the power sector and consequently inhibiting investment in the sector.
“This situation also impacts adversely on liquidity in the sector. However, equitable billing demands that electricity consumers are metered. “This is the only way to engender the confidence of consumers in the billing process.
Metering should therefore be accorded a high priority.” The MAN president explained that any government policy expected to bring harsh economic implications in the country was not only bound to affect the manufacturing sector operators alone, but also common Nigerians, with the burden being passed to low income earners by local manufacturers as the only way to remain in business.
He chided government, saying that manufacturers operating in the country had been overstretched in all situations of production with the electricity tariff expected to raise cost of production and inflate prices of goods in the country. According to him, the manufacturers spent oveN67.38 billion on self-generated electricity with energy cost accounting for over 38 per cent of production cost in 2019.
“There should be a strategic approach to electricity pricing to avoid a pushback from consumers. Only two months ago, there was a review, now another review. The commercial arguments may be strong, but there is a social context to be reckoned with, especially given the kind of product in question,” Ahmed said.
In his own reaction, the LCCI Director-General, Dr. Muda Yusuf, said: “We need to worry about the sensibilities of the people. Let me reiterate that we are in support of a cost reflective tariff for electricity. But the transition to the new pricing regime should be strategic and gradual to minimize shocks and risk of pushback by the consumers. “Context matters in policy conceptualisation and implementation. We need to worry about social and economic contexts.
“The economy is currently in a recession, purchasing power has been significantly eroded across all income classes, poverty situation has been worsening and there is spiralling inflation; there are fresh concerns about resurgence of COVID-19.
“These contexts should have a moderating effect on price movement at this time, especially for a product of high social significance. It is important to take these factors into account in order not to put the entire reform process at risk.”