Nigeria's private sector clamours for review of power tariff

Nigeria's private sector is calling on the government to halt the increase in electricity tariffs for band A customers, pointing to the recent rise in the value of the naira as a key factor in determining the tariff. Segun Ajayi-Kadir, Director General of the Manufacturers Association of Nigeria, weighed in on this issue during an interview with CNBC Africa. The private sector has expressed deep concern over the 200% hike in electricity tariffs, especially in the face of ongoing supply challenges and frequent power outages in the country. Ajayi-Kadir highlighted the lack of performance in the electricity sector, citing 12 national grid collapses in 2023 as a clear indication of the problems plaguing the industry. He emphasized the need for constructive dialogue between the organized private sector and the government to address these pressing issues. Ajayi-Kadir pointed out that the promised 20 hours of power supply for band A customers are often not met, raising questions about the justification for the tariff increase. The discussions between industry players and government officials are aimed at providing clarity on the tariff-setting process and ensuring transparency in the review process. Despite the challenges posed by the tariff hike, there is optimism that ongoing engagements will lead to a fair and sustainable solution for all stakeholders involved. Moving on to the foreign exchange (FX) market, Ajayi-Kadir touched on the recent appreciation of the naira and its potential impact on manufacturers. He noted that a high exchange rate had previously hindered importation of essential raw materials and spare parts, leading to increased production costs. The recent improvement in the value of the naira is a positive development for manufacturers, as it could lower operational expenses and enhance competitiveness in the market. While the immediate reduction in product prices may take some time to materialize, Ajayi-Kadir expressed confidence that manufacturers would benefit from the favorable exchange rate in the long run. The interventions by the Central Bank of Nigeria (CBN) are expected to stabilize the FX market and support local businesses in managing costs effectively. The conversation also touched on the impact of Dangote Refinery on the prices of diesel and Jet A1 fuel in the country. Ajayi-Kadir highlighted the significant reduction in fuel prices following the refinery's operations, providing relief to companies dependent on diesel for power generation. The support for local production and the expansion of domestic manufacturing capacity are seen as crucial steps towards achieving sustainable economic growth and reducing operational expenses for businesses. The private sector remains optimistic about the potential benefits that local production and strategic investments could bring to the market, contributing to an improved business environment and enhanced ease of doing business in Nigeria. As stakeholders continue to engage in dialogue and collaboration, there is hope for a more resilient and competitive industrial sector in the country.