High electricity costs overwhelm South South, South East businesses
• Consumers to pay more for electricity from January 2022
• ‘Electricity now represents 80% production cost’
• 20 per cent of industries in A’Ibom, C’River have shut down
• Households lament frequent hikes
• MAN calls for urgent intervention
With an average of about N70 billion spent on alternative energy, yearly, by local manufacturers due to poor power supply, many industrial firms and businesses in Southeast and South-south are struggling to sustain their operations, with many already suspending production, a survey by The Guardian has revealed.
According to the operators, the high cost of electricity is taking a toll on their businesses, as manufacturers allege that distribution companies and their cohorts are frustrating the eligible customer initiative.
Similarly, efforts to shift to gas consumption as an alternative source to automotive gas oil (AGO), otherwise known as diesel, have resulted in higher costs of equipment migration and inadequate infrastructure to transport gas to factories.
With operating costs already near 80 per cent in some instances, the pass-on effect is already being felt by consumers in the form of a hike in the price of goods and essential commodities.
Indeed, the high cost of operations followed adjustments in tariff by the Federal Government and abuse of estimated billing by distribution companies.
While the confidence index of local manufacturers in the economy improved in the first half of the year, confidence remains extremely low in the Cross River and Akwa-Ibom regions of the country, according to the latest survey conducted by the Manufacturers Association of Nigeria (MAN).
Federal Government had, through the Nigerian Electricity Regulatory Commission (NERC), designed the Multi-Year Tariff Order (MYTO) in 2015 and the Minimum Remittance Order for the Year 2019, which implementation began in January 2021.
President Muhammadu Buhari had approved an electricity tariff increase, effective September 1, 2020, insisting it was inevitable.
Six months after the September approval, NERC began to enforce another new Multi-Year Tariff Order (MYTO), increasing electricity bills by over 50 per cent across the country, just as Nigerians were yet to come to terms with the new increase in electricity tariff.
Local manufacturers noted that the adjustment of N2.00 to N4.00 per kilowatt per hour of electricity by the NERC came at a wrong time when Nigerians are battling with the harsh operating environment.
While hikes by regulatory agencies were meant to ensure that “licensees finance their activities and make a reasonable profit for efficient operations” as stipulated in the Act, the agencies seem to have failed to “ensure that prices charged by licensees are fair to customers” as also stipulated in the same Act, that is if the outcry by consumers in the two regions is anything to go by.
Their cries came even while licensees are yet to begin to implement a new and latest tariff announced by the government, which was scheduled to take effect this month under the Service-Based Tariff (SBT) programme that began last year.
MEANWHILE, with plans to end the electricity subsidy from next year, Nigerians would have to pay more for the commodity under a new tariff arrangement to be unveiled by the Federal Government. The Federal Government reiterated the decision during a stakeholders’ engagement meeting organised by the Nigerian Electricity Commission (NERC) in Lagos. The government had pegged most of its subsidy payments in the electricity sector at N30 billion monthly.
Vice President Yemi Osinbajo had at the opening of the 14th Nigerian Association for Energy Economics (IAEE) conference in Abuja, recently, said the government expected the electricity sector to generate its rere for Transparency & Accountability in the Energy Sector, Abel Godson, stated that, “with the deteriorating nature of electricity supply in the country, coupled with a deteriorating and ageing infrastructure within the electricity network, government’s pre-occupation should be about stabilizing the market, and not tariff hike.”
IN Anambra State, especially around Awka and Onitsha, the Director-General, Awka Chamber of Commerce, Agulue Valentine, observed that factories and businesses faced terminal situations.
Describing Anambra as an industrial state, with very industrious people, he emphasised that every cottage factory in the state operates with electricity and spends nothing less than N80,000 monthly on electricity bills.
He recalled that around June, the Awka Chamber of Commerce carried out an assessment of industries, spanning manufacturing, printing, among others.
He said: “We found that out of about 200 places we visited, power was the main issue, especially after the COVID-19 pandemic. About 60 businesses in the area surveyed had shut down and their workers retrenched.”
Around Nibo and Agu Awka of Anambra State, there exist clusters of cottage industries operated by young entrepreneurs. According to Agulue, their usual complaint is the high cost of electricity.
“The tariff is now another hydra-headed monster rearing its ugly head up. Established industrialists find it hard to cope, where lies the hope of young entrepreneurs.
“Many factories have folded as a result of high electricity cost, especially the start-ups, of which a great majority are young entrepreneurs.
“Some of the major negative outcomes are poor productivity and high cost of goods and services. When somebody spends much to power equipment and machines used in the production of goods, the likely tendency is that he will increase prices to cover the cost. Also, when factories are over billed, retrenchment of workers becomes a possibility because paying them will be an uphill task,” he said.
Sizeable factories, according to him, get bills not less than N50,000 per month. These are factories with a working capacity of no fewer than fifty direct workers.
The head of an engineering firm in Awka, who simply identified himself as Mr. Ibeh, described electricity cost as alarming and feared it could send him out of business.
“Powering machines with electricity is now costly due to high bills, and alternative power source, like fuel (petrol), is not cheaper. I spend about N25,000 monthly on fuel compared to N15,000 I paid 18 months ago, and electricity bills is about N30,000 monthly.”
He called on government and power management authorities to ameliorate their plight.
Similarly, an Onitsha-based baker, who would only give her name as Mrs Amaka, corroborated claims that electricity bills had become unbearable, leading to increase in prices of products. She said: “Cost of monthly electricity bills (estimated bills) hovers between N24,500 and N30,000 monthly while we still spend almost same amount on fuel for the period they failed to supply light.”
MANUFACTURERS Association of Nigeria, Cross River and Akwa Ibom states branch identified high cost of tariff and epileptic power supply as major reasons some companies in the states have folded up.
The association lamented that over 20 per cent of registered members have closed down businesses due to inadequate power and the high cost of tariffs.
The Chairman of MAN, Chief Giandomenico Massari, said the cost of power from Electricity Distribution Companies (DisCos) has increased drastically.
He said: “There is an increase in the cost of the unit that makes it even difficult to sustain manufacturing of products and you know, one of the highest component in manufacturing cost is energy and because there is no stable supply, you have to run the generator to produce energy on your own, that is also increasing drastically with the high cost of diesel. Another thing is maintenance and the cost to even acquire equipment periodically that will produce energy is very high.”
The Executive Secretary of MAN, Cross River/Akwa Ibom states branch, Klinton Offiong, said as of 2019, the branch had about 32 members, but right now, only 22 are active in businesses. He said most of the companies closed down because they could not meet up with the high cost of tariffs and numerous challenges.
“Before now, we used to have about 32 members in the branch but now what we have as active members are 22. When I talk about members, it is not individuals I’m talking about companies because you register with MAN as a company not as an individual. The number is reducing by the day because companies are folding up. Most member companies have closed down business because they could not meet up with the high cost of tariff and numerous challenges outside electricity,” Offiong stated.
The Executive Secretary of Calabar Chambers of Commerce and Industry, Mr. Kenneth Asimita, noted that the biggest challenge remained irregular supply of the power, even after payment has been made.
Asimita, who described access to power as a measure for actual prosperity, growth and development, said stable electricity guarantees businesses will do well and households will fare better.
To him, cost of electricity is not the major problem, but the fact that electricity paid for is not delivered. “If power is available, even with the cost, I’m sure most businesses will function satisfactorily,” he said.
A baker in Calabar, who spoke in confidence, described the high cost of tariff and non-availability of power as a huge setbacks for his business.
He said his bakery pays monthly electricity bills as high as N300,000 for using electricity for fewer than 15 days in a month and over a million naira on diesel to run generators to complement operations.
Apart from the high tariffs, he described the power supply as epileptic. “We have our transformer attached to a meter, I don’t know how they calculate the unit, they promised to show us but up until now, they have not done that, all they do is to bring outrageous bills of almost N300,000 every month for us to pay, we don’t even use the power up to 15 days in a month and what we spend on diesel to run our two plants is over a million naira in a month. How do we get our profits when we spend all this on electricity alone,” he queried.
THE first challenge in Abia State, which gets its electricity supply from Enugu Electricity Distribution Company (EEDC), with headquarters in Enugu, is inadequate meters. It was gathered the company introduced the “Estimated Billing Method” in the absence of meter, which in most cases overestimates electricity consumption.
Where meters are in place, the company would still not undertake reading of meters, especially in remote areas with difficult terrains, it was gathered.
At the Umuahia office of the EEDC, some customers that have meters were heard complaining of over-billing, stating that their bills did not tally with meter-readings, thus confirming complaints that their meters were not actually read.
What should be the ideal, according to a member of Umuahia Chamber of Commerce, Industry, Mines and Agriculture (UCCIMA), who spoke in confidence, is for prepaid meters to be provided. He noted that meters are not available to all that desired them.
A visit to some select companies confirmed use of Estimated Billing Method and irregular or erratic power supply, especially when high bills are charged for periods there was no supply. A factory manager, Mr. Udo Denis, told The Guardian that his company paid EEDC millions of naira monthly and still spends an average of N5 million on diesel to power generators.
When Lady Ada Chukwudozie, vice-chair of the Anambra, Enugu and Ebonyi chapters of the Manufacturers Association of Nigeria (MAN), addressed the 33rd Annual General Meeting of the association, she had identified inadequate power supply as a major challenge confronting the manufacturing sector in the Southeast zone.
Chukwudozie lamented that customers of EEDC were grappling with outrageous bills.
A supermarket operator along Edinburgh road in Enugu, Mr. John Ukwuoma, told The Guardian he spends close to N30,000 monthly on electricity bills alone.
“Electricity is a challenge to my business. I have prepaid meter but I tell you I don’t have count of how I use the subscriptions I make from time to time. I usually recharge N10,000 on each occasion but at times, I discover that within the month, I have recharged three times. That does not mean that my supplies are regular. They supply light to me from 10 am daily and by 4 pm, it is gone for the day. But at intervals within the period, the light goes off for between 30 and 40 minutes.
“My business is patronised more in the morning and evening hours and this is the time I won’t have electricity,” he disclosed.
Statistics obtained from the headquarters of the Enugu Electricity Distribution Company (EEDC) in Enugu, indicated that tariffs have been unstable and increases are frequent.
IN Imo State the branch chairman of MAN and the Owerri Chamber of Commerce Industries, Mines and Agriculture (OCCIMA), complained bitterly about the development.
A former President of OCCIMA, now the National Chairman of Vegetable Oil Association of Nigeria, Chief Okey Ikoro (Osunmanu), lamented that his factory, Camela Vegetable Oil Limited, located at Industrial Layout, Owerri, had been paying about N7 million monthly to the EEDC since 2018, while about N5 million is spent on diesel, also on monthly basis.
The Secretary-General (Imo and Abia) chapter of MAN, Prince Henry Cyprain, described complaints about hikes by members in the two states as worrisome.
Ikoro told The Guardian he was over-billed since 2018, saying an unregulated Maximum Demand Meter was installed in his factory. His protest to the authorities, according to him, caused the error to be rectified but he is now faced with how to get refund of the excesses paid since 2018.
“Most of their meters don’t go through the National Certification for Meter. They are supposed to certify every meter before use. We just discovered that their meters are not certified.
“I had to write to them to come here. They came here and they discovered that my meter was off completely since it was installed and I have been paying. Many people, who don’t have this experience, will not know why they are paying high bills.”
MOST residents of Rivers State claim that the high cost of electricity had resulted in to slash in salaries by companies, worsening the already grim situation.
Individuals, organisations, religious bodies, companies in the state, who are unable to cope with current electricity cost, have decided to pull out completely, among which were manufacturing companies.
Speaking with The Guardian, a cleric with the New Mount Zion Church in Port Harcourt, Mr. Chukwudi Paul, said his church decided to cut off from the electricity firm because it could no longer bear the cost.
Chairman, Rivers and Bayelsa states chapter of MAN, Adawari Pepple, told The Guardian his members have great difficulties in comprehending the current electricity tariff.
“It is anti-industrialisation, anti-manufacturing because almost 60 to 70 per cent of the cost of manufacturing hinges on power,” he noted.
Pepple said there was no way the cost of electricity will be as high as it is and the prices of goods will remain affordable to Nigerians, whose incomes do not increase with inflation.
He added: “It also means the cost of goods will be very high and the prices of products will be very high, and in a depressed economy as we currently have in Nigeria, the natural consequences is that demand will be far less and no business will be profitable again and that will lead to the shutdown of many businesses.
“The consequences of high electricity tariff is very obvious because factories will shut down and industrialisation will be stalled, that means that external goods will flood the market, even from countries we help to provide power.”
According to him, one of his members, who used to pay N80,000 per month now pays an electricity bill of N300,000.
“In Manufacturing, the profit margin is not in the 10s and 20s percentage, we count in one and two per cent profit margin and if you give us astronomical 300 per cent hike, we have to factor that in our goods and the people will suffer the consequences because they have to afford it with little or no funds available in their pockets.”
He said the cost of electricity accounts for 60 to 80 per cent of the cost of production.
He urged the government to urgently review electricity tariffs in the country, warning that it is not good for manufacturers and citizens.