45% electricity hike is a time bomb — MAN President

Hike in electricity tariff has brought mixed reactions, ANDREW OJIEZEL, sought to know from the President of Manufacturers Association of Nigeria (MAN), Dr. Frank Udemba Jacobs, the implications of the hike, and how it will affect Nigerians, if it is allowed to stay. Excerpt:

I want you to tell Nigerians, the implications of the hike in electricity tariffs?
With the current poor supply of electricity, such an increase will raise the cost of production of manufacturers and by implication may translate to higher prices of goods, thus making local products even less competitive. The issue of electricity supply is of great concern to MAN considering that it has been a major challenge to the manufacturing sector. MAN has contested the various Multi Year Tariff Orders of the Nigerian Electricity Regulatory Commission (NERC) and demanded that fixed charges be removed.
Unfortunately, the initial analysis made by MAN showed that the removal of fixed charges and the recent increase in tariff under the proposed new tariff order (MYTO 2.3) will raise the cost of electricity and by implication, the cost of production. It should be noted that increase in tariff would not be supported with increase in electricity supply and this means that manufacturers will still depend on self-generation of electricity while paying higher tariff.
This is so because there is no improvement in electricity supply and this means that everyone would still be buying fuel or diesel to run their generators.

Will jobs not be affected as many people/firms who may not be able to coop with the harsh economic situation may close down or relocate to other West African countries?
Of course, as I said earlier, it will. If the cost of production goes up, prices will definitely go up because there is a limit to which an investor will accommodate the increase without passing it on to consumers, at least for manufacturers. For services, the price will automatically go up. Manufacturers will operate and produce if their products have market. In a situation where there is no patronage of their products because of high prices, especially in the case of Nigeria where there are imported alternatives which are smuggled into the country, and which are sometimes substandard but cheaper, the manufacturer may have to stop production. There will definitely be job losses. Relocation to other countries is an alternative but expensive option because of the machinery involved which are not easy to dismantle and move.

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If the statement of the Minister is true, should Nigerians pay more tariff before they can enjoy improved electricity while the issue of release of meter for each building is not feasible, three years after privatization as against the stipulated law of 18 months?
In fact, it should be the other way round. There ought to be improvement in electricity supply to justify the increase. This is a case of monopoly. DISCOs are not interested in metering houses because it pays them not to do that so that they can continue with their estimated billing system. It is obviously a breach of the law not to have provided meters after 18 months.

How much are manufacturers spending in fueling their generators daily?
From our estimation, the amount manufacturers spend monthly in fueling their generators run into billions of Naira as some factories are not connected to the national grid but operate exclusively on generators due to the irregularity and instability of the power from the national grid.

In your assessment, has privatization succeeded in the much expected turn-around of the fortune of those privatized companies, example, Daily Times newspapers, PHCN and others, have they yielded the expected growth and development as a result of privatisation?
Sincerely speaking, privatization is the way to go and it has worked successfully in many countries where it has lowered prices and, at the same time, provided efficient services. Even in Nigeria, we have the experience of GSM providers even though the rates are not low enough. In the cases you mentioned above, it is unfortunate.

Don’t you think the whole privatization should be reviewed, if possible government can claim them back, though, this may bring lots of criticisms and lawsuits, which mean government, should take drastic step in reclaiming them no matter how tough it may be?
There are legal implications in doing so but I think the power purchase or privatisation agreement should be reviewed and the entire power arrangement revisited as the current operators do not seem to have the capacity to achieve effectively. With less than 5000 megawatts of power at the peak in a country with a population of over 170 million people, you can see that there is a huge challenge. To improve supply, there may be need to introduce micro grid or community grid system. Embedded generation is also recommended as it will increase power generation. Perhaps, more players with requisite capacity should be brought in. Hiking up tariff is not the solution.
Again, the problem of gas-to-power which appears to be hydra-headed should be addressed. Pipeline security is a challenge while the issue of disruption of the production process of oil companies is there. Non implementation of the Gas Master Plan fully is also there. Unless these are addressed, gas to power may be difficult to achieve and consequently, power generation cannot be fully realised. Similarly, transmission must be overhauled and improved upon as it is apparent that current transmission facilities are inadequate.

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How can you say MAN has contributed towards the industrial sector in recent months?
We have in number of ways been able to in the last one year, engaged government at all levels including ministries, departments and agencies on a number of issues affecting the manufacturing sector and the Nigerian economy. Some of the issues advocated on were resolved while others are currently being addressed. In broad terms, MAN recorded remarkable advocacy success, some of which are highlighted here.
Improved consultations and contributions to strategic policies of government as being member of several committees of the government, which among others, include the presidential jobs board, steering of micro, small and medium enterprises (MSME) as well as the steering committee of national quality infrastructure project.
Improved recognition of MAN by the Federal Government through representation on the governing councils and boards of all federal and state polytechnics as well as several boards of government parastatals and agencies, successful resistance of the implementation of MYTO 2.1 introduced by Nigeria Electricity Regulatory Commission (NERC) and distribution companies (DISCOs).
You are aware that MAN is in court with NERC and the DISCOs on their contentious bills and has obtained an injunction, restraining them from applying such charges or disconnecting members who refused to pay at the MYTO2.1 rate.
We have advocated for the removal of the monthly exorbitant fixed charges collected from electricity users by DISCOs, the non-reflection in MYTO 2.1 and the downward review of electricity bills for SMIs in particular and prorating of electricity charges to consumption.
In the same vein, we have strengthened MAN’s cooperation and collaboration with government agencies, such as Standards Organisation of Nigeria (SON), the Nigeria Customs Service, Raw Materials Research and Development Council (RMRDC), Nigerian Shippers Council, as you may be aware, MAN collaboration with SON has brought sustenance of the Memorandum of Understanding between MAN and SON on the 25 per cent reduction on all SON administrative charges as well as SONCAP exemption for the importation of spare parts, machineries, raw materials and packaging materials and the issuance of the annual import permits to manufacturers.
In addition to all I have mentioned above, we have been able to have improved implementation processes of the Pre-Arrival Assessment Report (PAAR), implementation processes in conjunction with the Nigeria Customs Service. This led to the profiling of MAN members for special clearance and admission into the fast-track system, the setting up of a conflict-resolution committee made up of the Nigeria Customs and MAN officials to sort out and resolve any issue arising from the PAAR for those that had queries of who were not satisfied with the valuation of their imports.
We have partnered relevant agencies to establish MAN centre for Entrepreneurial Development which is an Entrepreneurial academy for aspiring manufacturers.
Equally, we have been able to advocate for home grown policy that promote import substitutions and patronage of made-in-Nigeria products which have incidentally become government position. To strengthen this advocacy, MAN in partnership with Spin Intelligence is organizing the maiden edition of Manufacturing Expo between March 13-17, 2016, at the Landmark Centre, Lagos