…new electricity tariff will lead to lower profit, tax, and may lead to job lay off
The Manufacturers Association of Nigeria (MAN) said it spent about N144.5 billion on alternative energy in 2022 as against the N77.2 billion it spent in the preceding year of 2021.
The president of the association, Otunba Francis Meshioye disclosed this while speaking on Arise Television Programme, ‘Morning Show’ on Monday.
He decried the planned increase in electricity tariff saying it would have spiral effects on the economy.
According to him, any rise in your input cost means that your cost of production will rise and this will impact negatively on the profit of the company. He said the sudden increase of about 40 percent in the cost of energy- electricity will impact negatively on the performance of manufacturers.
“In the past years the increase on the tariff has been very sky rocket. In the past eight years, increase in tariff has risen to about 180 percent. If we now have additional 40 percent increase on this, it means the cost of doing business is going to be very huge.”
“The core driver in the manufacture’s business is energy – electricity and if we want to look at your driving cost and you see this flagging all the time, it is going to be a thing of concern.”
He said it is easier for private sector and manufacturers in particular, to bear the cost. But, if the government which is a major spender is unable to bear the cost of electricity and could not pay, how do you think it is will be easy for manufacturing business to accommodate the cost, he asked.
“Ultimately, the cost will be aggregated and passed on to the consumers. When this happens, with the elasticity of demand there is likely to be a dwindling demand by the buyers. If there is low demand it means your revenue will be low, the cost is higher and the profit becomes lower.”
The impact of this to manufacturers would be lower returns on investment and lower tax to the government. So the parties would be losing at both ends. Meaning the government would be losing and the private sector would also be losing.
“In the long run, as an investor I would want to look at where else I can take my investment fund to outside the country. There would likely be spiral effect that will affect all parties. People would be thrown into labour market and there is likely to be more crimes.
He said many of the manufacturers that have left Nigeria did that because of lack of infrastructure one of which is energy- electricity.