Manufacturers Lament Rising Electricity Tariffs, Warn of Economic Strain

The incessant increase in electricity tariffs in Nigeria is severely hampering the manufacturing sector and threatening overall economic growth, says Segun Ajayi-Kadir, mni, Director General of the Manufacturers Association of Nigeria (MAN).

Ajayi-Kadir emphasized that electricity is a critical component in the production process, directly affecting manufacturing costs and product prices. However, the sector has been struggling under the weight of frequent tariff hikes, which continue to erode competitiveness and hinder industrial expansion.

Energy Security and Industrial Development
No nation can achieve significant industrial growth without energy security—ensuring timely access to sustainable and affordable electricity. It was in pursuit of this objective that the Nigerian power sector was privatized in 2013, with the expectation that private sector participation would enhance electricity supply, particularly to industries.

Regrettably, this vision has not materialized. Many believe that operators in the power value chain lack both the technical expertise and financial capacity to deliver optimal results. Despite an installed power generation capacity of approximately 10,000MW, actual supply remains far below expectations due to inefficiencies in generation and distribution.

Tariff Hikes Amid Declining Supply
Despite failing to meet electricity demand, Nigeria has continued to implement tariff increases without corresponding improvements in supply quality. According to data from the National Bureau of Statistics (NBS), electricity supply declined from 5,909.83 GWh in Q2 2023 to 5,612.52 GWh in Q2 2024—a 5.03% year-on-year decrease—even as tariffs surged by over 230%.

MAN has repeatedly called for increased power generation, lamenting that Nigeria’s daily electricity supply of about 4,000MW is grossly inadequate for its population of over 200 million people. Experts estimate that the country requires at least 30,000MW to meet industrial and domestic needs effectively.

Threat to Competitiveness and Economic Stability
The proposed tariff increase poses a severe risk to the competitiveness of Nigerian manufacturers, as it compounds the already high cost of production. Ajayi-Kadir warned that the situation would worsen inflationary pressures, shrink disposable incomes, and escalate unemployment rates due to the potential closure of more businesses.

Moreover, manufacturers cannot simply pass these increased costs on to consumers, who are already struggling with low purchasing power. As a result, many companies face mounting unsold inventory and declining profit margins, further threatening economic stability.

Call for Government Action
Ajayi-Kadir expressed uncertainty over whether the Federal Government has finalized plans for another electricity tariff hike. However, he urged authorities to reconsider and instead:

• Review the performance of electricity distribution companies (DisCos) following previous tariff increases.
• Assess the impact of higher tariffs on manufacturers, businesses, and households.
• Critically examine the cost-reflective tariff model used by DisCos.
• Audit the level of investment in distribution infrastructure by power sector operators.

Nigeria’s industrial sector remains the backbone of economic growth, but persistent power challenges continue to stifle progress. MAN insists that until the electricity supply improves significantly, further tariff increases will do more harm than good to manufacturers, businesses, and the economy at large.

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