The hike in electricity tariffs has sent shockwaves through Nigeria’s manufacturing sector, leading to the closure of over 300 companies and the loss of 380,000 jobs since April 2024, according to the Manufacturers Association of Nigeria (MAN).

MAN voiced deep concerns over the crippling impact of the tariff increase, painting a grim picture of the nation’s economy.

Senator Ahmed Abdulkadir, speaking on behalf of MAN, delivered this stark revelation at an investigative hearing organized by the Joint Committees on Power, Commerce, National Planning & Economic Development, and Delegated Legislation. The hearing was held in Abuja, drawing attention to the dire straits faced by the manufacturing industry following the tariff hike.

In a controversial move In April, the National Electricity Regulatory Commission (NERC) increased electricity tariffs from N66 to N225 per kilowatt (kW) for Band A customers, who receive 20 hours of electricity daily. This significant jump in costs has been a heavy blow to manufacturers, who already contend with a myriad of operational challenges.

Abdulkadir pointed out that electricity costs now constitute about 40% of production overheads for manufacturers. This has severely affected their financial viability, leading to widespread job losses and factory shutdowns.

One striking example he cited was a company that had to slash its workforce from 360,000 to a mere 5,000 employees due to the exorbitant cost of doing business in the current economic climate.

The senator did not hold back in criticizing NERC’s process, asserting that the supplementary order of April 3, 2024, which raised the tariff, was never properly communicated to the public. He accused the distribution companies (DisCos) of neglecting the guidelines for consumer consultation before applying for the increase, a move he deemed unfair and detrimental to stakeholders.

“Contrary to NERC’s position, we are aware that the tariff hike was not adequately publicized, and DisCos failed to adhere to required consultation procedures,” Abdulkadir stated. He added that this lack of transparency and consultation has only fueled the frustration and resistance among manufacturers and the general public.

In defense of the tariff hike, Minister of Power Adebayo Adelabu argued that the Federal Government could no longer sustain the N3 trillion subsidy for electricity. He highlighted that the removal of subsidies for Band A customers was essential to prevent the government from accruing unsustainable debts.

“The decision to increase tariffs was necessary. Without it, the expected subsidy would have been about N3 trillion, which the government simply cannot afford,” Adelabu stated.

The minister further emphasized that even with the increased tariffs, Nigeria still offers some of the cheapest electricity rates in sub-Saharan Africa. Also, he said that the cost of electricity remains more affordable than other power sources such as premium motor spirit and diesel.

“Band A is cheaper compared to other sources of generating power. It is almost 50 percent cheaper to connect to Band A of the national grid than to run on fuel and diesel,” he said, arguing that businesses benefit more from grid connections than generating power individually using fuel or diesel.

The tariff hike has exacerbated the already dire economic conditions faced by Nigerian businesses, especially the informal sector. With Nigerians grappling with poor earnings and depleted spending power, it has become increasingly difficult for citizens to cope with higher utility bills.

Deputy Speaker of the House of Representatives Benjamin Kalu acknowledged these hardships during a public hearing organized by the House of Representatives Joint Committee on Power, Commerce, National Planning, and Delegated Legislation.

“The sharp increase in electricity tariffs further worsens the economic predicament of the masses. Higher utility bills have ripple effects, increasing operational costs for businesses and leading to higher prices of goods and services,” Kalu stated.

The public outcry has also taken a legal turn. A high court in Lagos on Tuesday issued an interim order preventing NERC and ten DisCos from implementing the new tariffs. This decision followed a suit filed by MAN, challenging the tariff hike.

Judge Lewis Allagoa granted the order, restraining the DisCos and NERC from taking any further steps, including disconnecting power supply until the case is resolved. The court has scheduled a hearing for June 24 to further deliberate on the matter.

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The Minister of Power Adebayo Adelabu has defended the Federal Government of Nigeria’s decision to increase the electricity tariff for a section of customers.

The Federal Government had earlier this year, implemented a controversial hike in electricity tariffs for Band A users in a bid to address Nigeria’s escalating electricity subsidy burden. The move, aimed at reducing the subsidy from approximately N3 trillion to N1 trillion, has sparked significant backlash from Nigerians.

During a public hearing organized by the House of Representatives Joint Committee on Power, Commerce, National Planning, and Delegated Legislation, Adelabu defended the tariff increase. He highlighted the need for the hike, arguing that without it, the government would be unable to sustain the substantial subsidy costs.

The minister stated that the new tariff regime still positions Nigeria as one of the countries with the cheapest electricity rates in sub-Saharan Africa.

“We are still about the cheapest, even in sub-Saharan, in spite of the tariff. Our neighboring countries pay higher. So the price isn’t comparable,” he asserted.

He further explained that the cost of electricity remains more affordable than other power sources such as premium motorspirit and diesel.

“Band A is cheaper compared to other sources of generating power. It is almost 50 percent cheaper to connect to Band A of the national grid than to run on fuel and diesel,” he said, arguing that businesses benefit more from grid connections than generating power individually using fuel or diesel.

Despite the government’s justification, the tariff hike has met with widespread resistance due to the heavy financial burden it casts on both individuals and businesses. Deputy Speaker of the House of Representatives, Benjamin Kalu, acknowledged that the public has valid concerns.

“There are genuine concerns that higher utility bills resulting from this tariff hike can have ripple effects on operational costs for businesses, potentially leading to increased prices of goods and services,” Kalu noted.

The public hearing came a day after a Lagos High Court temporarily ordered the Nigerian Electricity Regulatory Commission (NERC) and ten electricity distribution companies (DisCos) not to implement the new tariffs. The court’s decision came after the Manufacturers Association of Nigeria (MAN) filed a suit challenging the tariff hike.

The interim order, granted by Judge Lewis Allagoa, restrains the DisCos and NERC from increasing tariffs or disconnecting power supply until the case is resolved.

“That the order is without prejudice to the obligation of the plaintiff from paying their electricity bill at the old rate,” the court said.

The affected DisCos include Abuja Electricity Distribution Company (AEDC), Ibadan Electricity Distribution Company (IBEDC), Eko Electricity Distribution Company (EKEDC), and several others.

MAN, the applicant in the suit, argued that the tariff hike is unsustainable and detrimental to the economic environment. The court has scheduled further hearings for June 24 to deliberate on the matter.

Economic Hardship Fueling Public Resistance

The increase in electricity tariffs comes at a time when Nigerians are grappling with poor earnings and depleted spending power. The economic hardships have made it difficult for many to afford higher utility bills. Subsidies are said to be one of the few benefits Nigerians receive from the government, as poor leadership has forced citizens to provide basic necessities, such as water, for themselves.

However, Adelabu maintained that the tariff hike is a crucial step for reducing the government’s fiscal burden. He noted that the new rates, effective from April, apply to customers receiving at least 20 hours of electricity daily, who will now pay N225 per kilowatt (kW).

The minister stressed that the government’s financial constraints necessitate the removal of subsidies.

“The federal government could no longer afford to pay subsidies on power, necessitating the tariff hike,” he stated.

The government had in May last year, announced the removal of fuel subsidies.