Consumers will bear the brunt if the federal government goes ahead to increase electricity tariffs, according to the Manufacturers Association of Nigeria, MAN.
The warning comes a few days after the government proposed raising tariffs paid on electricity by 40 percent.
The increase is to commence on July 1, the government said.
But speaking to the News Agency of Nigeria, NAN, the Director General of MAN any increase in tariff will lead to higher costs of production, lower profit margins, a decline in manufacturing activities, and downward revenue remittances to the government.
He explained that manufacturers are already spending huge amounts on sourcing alternative energy, noting that close to N145 billion was spent in 2022, an increase of 87 percent as compared to the N77.22 billion spent in 2021.
What the government should be doing, he said, is to increase investment in critical infrastructure in the power sector to make energy more available at a low cost.
According to him, “Already, we have power constituting between 28-40 percent in the cost structure of manufacturing industries.
“You can imagine the impact on manufacturing industries that are energy-intensive such as metal processing, heavy machinery, and chemicals manufacturing.
“A spike in the electricity tariff will erode the profit margin of the manufacturers and reduce their ability to expand operations and create new jobs.
“Manufacturers will ultimately pass on the additional cost to the consumers of their products and this will increase the cost of the products in the market and complicate the rising inflation rate in the country.
“Also, the sector’s competitiveness will definitely worsen as the high cost of the products will make locally produced items less competitive when compared with imported alternatives.
“As it is today, the manufacturing sector, which is the engine of growth, is still struggling as a result of the inclement production environment in Nigeria.
“The expectation is that government will engage in extensive and intensive consultations with the manufacturers; focus on measures that will salvage the sector and halt the trend of shutdown of factories, knowing the implications and the multiplier effects on employment and the economy.
“Care should be taken to avoid introducing burdensome measures that will further strangulate the manufacturing sector and the whole economy.”
