The Manufacturers Association of Nigeria (MAN) has warned that implementation of the proposed hike in electricity tariff by power distribution companies may force more multinational companies to relocate their factories outside Nigeria.
President of MAN, Francis Meshioye, who gave the warning while speaking to newsmen, noted that some international manufacturing firms had already exited the country due to the harsh operating environment including power crisis, adding that any further hike in tariff would lead to an exodus of companies, and thus called on the government to reconsider the move.
Recall that various public notices from some of the electricity distribution companies, DisCos, had stated that the electricity tariff would be raised by about 30 to 40 per cent for selected categories of consumers with effect from July 1, 2023.
They have, however, backtracked on their earlier announcement of a tariff hike, stating that the Nigerian Electricity Regulatory Commission (NERC) had yet to approve the hike.
Meshioye stated: “In every system there’s always a core structure and this includes the elements that make up the total cost spent in generating your revenue. Now, what we experience as manufacturers is that energy cost is a major cost in processing our products.
“The downsizing of businesses in Nigeria, for instance, shows that businesses are not doing very well. So this power issue and other things have made some manufacturers, particularly international businessmen to relocate from Nigeria to other countries.
“Therefore anything to reduce this energy cost will be very beneficial both to manufacturers and the masses in general. So it (power) is a high cost to us, and a major driver in terms of cost. At the same time, it could lead to other things.
“It is one of the things that make some manufacturers to seek to move their business to another region and site their factories there. It is not the only reason, but, of course, it is one of the major ones.”
On other reasons that might make manufacturers to exit Nigeria, Meshioye said: “We have the unpredictability of the foreign exchange rate. In a business model, the more predictable the forex, the better you are. But the availability of the forex itself is another thing. All these are problems that border manufacturers.”