The Manufacturers Association of Nigeria (MAN) has warned that power distribution firms’ projected increase in electricity tariffs may push more multinational corporations to transfer their plants outside of Nigeria.
Francis Meshioye, President of MAN, issued the warning while speaking to reporters, noting that some international manufacturing firms had already left the country due to the harsh operating environment, including the power crisis, and that any further tariff hike would result in an exodus of companies, and thus urging 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.”