Manufacturers Push for DisCos Review Amidst Proposed Tariff Hike
The Manufacturers Association of Nigeria (MAN) has called on the Federal Government to review the performance of electricity distribution companies in light of their investment in distribution infrastructure, following reports of a planned increase in electricity tariffs.
In a statement, the Director-General of MAN, Segun Ajayi-Kadir, called for a review of DisCos as he decried the incessant rise in electricity costs, stating that it is stifling the growth of the manufacturing sector and, by extension, the country’s economy.
Ajayi-Kadir urged the Federal Government to “conduct a study on the impact of the increase on the manufacturing sector in particular and businesses and households in general; sincerely and critically interrogate the so-called cost-reflective tariff template of the DisCos; and audit their level of commitment to investment in distribution infrastructure.”
He maintained that electricity is a critical input in manufacturing processes with a significant impact on production costs and product prices, adding, “The incessant increase in electricity tariffs in Nigeria is hindering the performance of the sector and the growth of the economy.”
He lamented that, despite the privatisation of the power sector in 2013, the expected improvements in energy supply have not materialised.
The MAN DG reckoned that the major problem lay in the inability of operators in the electricity value chain to meet demand due to a lack of technical and financial capacity.
“The installed capacity has been consistently put around 10,000 MW, yet it has not been fully utilised due to the limited capacity of the generating companies and DisCos to generate and distribute adequate electricity supply nationwide,” he said.
Ajayi-Kadir pointed out that while electricity supply has been dwindling, consumers have continued to face tariff hikes without any corresponding improvement in service delivery.
“According to the National Bureau of Statistics, electricity supply stood at 5,909.83 GWh in Q2 2023 but reduced to 5,769.52 GWh in Q1 2024 and further declined to 5,612.52 GWh in Q2 2024 when the tariff increase of over 230 per cent was implemented,” he noted. “This indicates a 5.03 per cent decrease year-on-year and a 2.72 per cent quarter-on-quarter decline.”
The MAN DG warned that the proposed tariff hike would have dire consequences on businesses, as it would further increase production costs, worsen inflationary pressure, and erode manufacturers’ profit margins.
“The persistent increase in tariffs means that consumers will continue to bear the brunt of inefficiency in the electricity value chain. As it stands, manufacturers are disadvantaged as the increase cannot be transferred to consumers who are already battling with low purchasing power,” he noted.
Ajayi-Kadir urged the Federal Government to commission an independent review of the DisCos’ performance, study the impact of previous tariff increases on businesses and households, and audit the level of investment in distribution infrastructure.
“I am not certain that the Federal Government has reached the conclusion that electricity tariffs would be increased. I hope not. The advice would be that the government should commission a review of the performance of the DisCos after the last unwarranted increase,” he added.
Stakeholders in the manufacturing sector have repeatedly called for an increase in electricity supply, noting that the country’s daily generation capacity of around 4,000 MW for over 200 million people is grossly inadequate.
MAN maintains that Nigeria needs at least 30,000 MW of electricity to meet its growing energy demands.
Economic Confidential had earlier reported that the Special Adviser to President Bola Tinubu on Energy, Olu Verheijen, had disclosed that the current power tariffs would rise by about two-thirds for many customers to reflect the cost of supplying it, adding that an increase should be expected within months.
Verheijen on Monday took to her X account in an attempt to clarify perceived misconceptions of her statement, writing, “Following the increase of Band A tariffs, current tariffs now cover about 65 per cent of the actual cost of supplying electricity, with the Federal Government continuing to subsidise the difference.
“The Federal Government is committed to fair electricity pricing, protecting vulnerable Nigerians, and expanding access to reliable power. Right now, N200bn per month is spent on electricity subsidies, but the wealthiest 25% of Nigerians receive the biggest share,” she added. “To address this, we are working towards transitioning to a targeted subsidy system that ensures that low-income households receive the most support.”
