Power distribution companies in Nigeria are facing billions in collection losses as manufacturers refuse to pay the newly approved tariff rates, opting instead to continue with the old rates.
The Manufacturers Association of Nigeria has directed its members to maintain payments at the previous rate of N66/kWh until a resolution is reached on their petition to the National Electricity Regulatory Commission, Nairametrics reported.
The NERC had approved the new tariffs to address financial instability and mounting losses among DisCos, which have struggled due to the absence of cost-reflective tariffs. T
he Minister of Power, Adebayo Adelabu, previously stated that the federal government was subsidizing about 67% of the power sector, amounting to an expected N2.9 trillion by the end of 2024. Additionally, the government has halted a significant portion of electricity subsidies, meaning about 52% of electricity costs will no longer be subsidized monthly.
MAN’s refusal to pay the new tariff rates is expected to exacerbate the financial challenges faced by DisCos. According to the latest NERC report, DisCos collected N294.95 billion out of the N399.69 billion billed to customers in the fourth quarter of 2023, resulting in a loss of N105.1 billion.
Manufacturers argue that they are being unfairly targeted with high electricity tariffs as part of a government strategy to shift the burden of electricity cross-subsidies onto them. This practice, where high-demand customers pay higher rates to subsidize those with less reliable power, was previously managed by the government before it ceased its subsidies.
In a letter dated May 9, 2024, MAN urged its members to adhere to the old tariff rates and assured them of continued engagement with NERC and DisCos to ensure a fair pricing process. The letter emphasized the association’s readiness to take legal action if necessary to protect its members from being compelled to pay the disputed rates.
To enforce the revised tariff, DisCos have threatened widespread disconnections targeting non-compliant companies and factories. An anonymous official indicated that DisCos might disconnect these entities to mitigate their financial losses, which are unsustainable under the old tariff.
Meanwhile, some manufacturers are exploring alternative energy sources, such as gas, to reduce their electricity costs. MAN’s Director-General, Ajayi Kadiri, confirmed that members had received bills reflecting the tariff hike and warnings of potential disconnections, criticizing the lack of engagement from DisCos.
Last Thursday, NERC indefinitely adjourned its verdict on MAN’s petition. Dr. Musiliu Oseni, Vice Chairman of NERC, stated that the commission needs time to review the petition and deliver a fair decision. MAN’s counsel, Tola Oshodi, urged the commission to suspend the new tariff, citing the lack of stakeholder engagement in the decision-making process.
“We are here to appeal. MAN was not given an opportunity to make representation before the new tariff was fixed. MAN is recognized in the guidelines as a stakeholder that must be engaged before such decisions, but it never happened. The provision for stakeholders’ engagement was not complied with. We appeal that the new tariff should be suspended as we go through the process of engagement,” Oshodi said.
