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Proposed increase in electricity tariff will kill Businesses – Organized Private Sector

Proposed increase in electricity tariff will kill Businesses – Organized Private Sector

The proposed increase in electricity tariff recently approved, and agreed upon by Electricity Distribution Companies and the Nigerian Electricity Regulatory Commission has been called into question with a strong belief shared by the  organized private sector (OPS) in Nigeria that it will not only kill businesses but equally spells doom for small and medium enterprises (SMEs) in particular.

Recall that the Nigerian Electricity Regulatory Commission (NERC) recently approved tariff increase for electricity distribution companies (DISCOs) effective April 1, 2020 based on Multi-Year Tariff Order (MYTO) methodology. This has however been suspended due to the COIVD-19 pandemic.

In a statement made available to Vanguard, yesterday, OPS comprising of Manufacturers Association of Nigeria (MAN), Nigerian Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), National Association of Small and Medium Enterprises (NASME), Nigeria Employers Consultative Council (NASME),National Association of Small Scale Industries (NASSI) noted that the nation’s economy is currently experiencing fragile growth, adding that any upward review will be counterproductive on consumption and productivity.

It stated: “Any form of increase in electricity in the face of inadequate electricity supply, high electricity tariff and exorbitant cost of self-generated electricity up to the tune of N119 billion (excluding billions of naira spent on settling monthly electricity bills) is not business friendly as it will further spike the cost of doing business with consequential upward spiral effects on unemployment rate.”

According to the statement, the expectations of OPS are: “A component assumption of the MYTO methodology is that electricity generation, transmission and distribution will improve in the process, leading to improved supply of electricity to customers.

“For that reason, various projections for generation capacities for different years were made. For instance, 5,500MW was projected for 2012; 7,500MW for 2013; 9,061MW for 2014; 10,071MW for 2015 and 10,571MW for 2016. Also, energy to be sent out to grid was projected at 30,715 GW for 2012; 41,884GM for 2013; 50,601 GW for 2014; 56,242 GW for 2015; and 59,034 GW for 2016.

“The pertinent questions are therefore; wouldn’t they have been accomplished? Wouldn’t it be better to think more on how to improve generation capacity hence transmission and distribution rather than squeezing the mere 4000MW to meet all revenue needs of key sharing stakeholders?”

Against this background, OPS recommended as follows: “The proposed increase in electricity is not business friendly, and will have a catastrophic impact on the real sector; spell doom for the small and medium companies; and further inflict misery on the citizenry. Therefore, the proposed tariff increase should be suspended in the best interest of the Nigerian economy.

“Even if electricity tariff cannot be reduced, it should not be increased. 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.”

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