Amid growing challenges, Nigeria’s manufacturing sector is facing existential threats, particularly from rising energy costs. Ever-rising production and logistics costs are jeopardizing the viability of this vital sector, pushing it to the brink of collapse.
Nigerian industrialists have repeatedly sounded the alarm about the adverse impact of rising energy costs. This has resulted in a nearly 430% increase in the price of petrol and a 212% increase in the electricity tariff for Category ‘A’ customers in the past year.
The Nigerian Electricity Regulatory Commission (NERC) on April 3 approved an increase in tariffs for Category ‘A’ customers. These customers, who enjoy 20 hours of electricity per day, will now have to pay N225 per kilowatt hour (kWh), up from the previous N66. The decision has drawn strong reactions from the Manufacturers Association of Nigeria (MAN), which has described the tariff hike as a negative economic impact.
In order to challenge the implementation of the increase, MAN filed a lawsuit against NERC and the electricity distribution companies. However, the move ended in a major setback for the manufacturers as the court dismissed the appeal on the grounds of abuse of process and premature procedural restraint.
The adverse decision represents a serious blow to manufacturers who were trying to revert to the previous electricity tariff. As a result, the manufacturing sector will have to continue operating with high production costs, leading to declining sales, increased unsold inventory, risk of closure and job losses.
The MAN President expressed concern over the declining attractiveness of manufacturing in Nigeria, noting that recent government policies have made manufacturing business unattractive. Rising electricity costs, combined with inadequate supply, are undermining the competitiveness of the country’s products and businesses, compounding the challenges related to production costs.
In a context where obstacles such as high interest rates, high diesel prices and increases in electricity tariffs are hampering the performance of the manufacturing sector, it becomes imperative to implement measures aimed at boosting the competitiveness and sustainability of the industry.
In conclusion, the need to find sustainable solutions to alleviate energy costs and strengthen the business environment is crucial to preserve the vitality and essential contribution of the manufacturing sector to the Nigerian economy.