Following a significant hike in electricity tariffs for Band A customers from N66/kWh to N208/kWh, the Manufacturers Association of Nigeria (MAN) has lodged a petition with the National Electricity Regulatory Commission (NERC) urging a reversal of the new rates. The association argues that the increased tariffs will exacerbate the already challenging economic conditions for manufacturers and business owners in the country.
In response to the escalating tariffs, Power Distribution Companies (Discos) are reportedly contemplating widespread disconnections of several companies and factories, fearing substantial financial losses estimated in billions of naira. Discos are facing significant collection losses as many manufacturers opt to continue paying the old tariff rates instead of the newly approved rates.
MAN has instructed its members nationwide to persist in paying the previous rate of N66/kWh to the distribution companies pending the resolution of the petition filed with NERC. The association is firm in its stance, highlighting the financial strain the new tariffs impose on its members.
NERC approved the new tariff to address the financial illiquidity and mounting losses incurred by Discos due to the lack of a cost-reflective tariff within the power sector. Minister of Power, Adebayo Adelabu, previously stated that the federal government subsidizes about 67% of the power sector, with subsidies expected to reach N2.9 trillion by the end of 2024.
A recent report indicates that approximately 52% of electricity costs will no longer be subsidized monthly, as the government has halted a significant portion of the electricity subsidy. With MAN’s refusal to pay the new tariff, Discos are expected to face further financial losses in the coming months.
NERC’s latest report shows that Discos collected N294.95 billion out of the N399.69 billion billed to customers in the fourth quarter of 2023, indicating a loss of N105.1 billion. MAN has accused NERC of singling out manufacturers for tariff hikes, suggesting that this is part of a strategy to shift the burden of electricity cross-subsidies onto them, a responsibility previously borne by the government.
In a letter dated May 9, 2024, MAN instructed its members to adhere to the previous tariff rates and not be deterred by NERC’s actions. The association emphasized its commitment to escalating discussions with Discos and the federal government, ensuring that members only pay a fair price for power supplied.
Discos are reportedly threatening widespread disconnections to secure payment of the revised tariff. An anonymous official mentioned that Discos would have no choice but to disconnect companies refusing to pay the new rate, as the old rate is unsustainable for electricity providers. Some companies are exploring alternatives such as gas and ‘eligible’ customers to reduce their electricity costs.
Meanwhile, MAN’s Director-General, Mr. Ajayi Kadiri, reported that members have received bills reflecting the tariff hike, with some being notified of impending disconnections. He described the situation as unfortunate, indicating a lack of willingness to engage with manufacturers for a mutually beneficial outcome. Last Thursday, a NERC panel adjourned its verdict on MAN’s petition indefinitely, with Vice Chairman Dr. Musiliu Oseni stating that the commission would take time to review the petition for a fair verdict. MAN’s counsel, Tola Oshodi, urged the regulator to reverse the tariff hike, arguing that the association was not given an opportunity to represent before the new tariff was fixed.