The Manufacturers Association of Nigeria has lauded President Bola Tinubu for signing the Electricity Act 2023 into law, describing it as a game changer in addressing the numerous constraints within the nation’s manufacturing sector.
The commendation was contained in a statement released by the association in Lagos.
MAN noted that the Electricity Act 2023 is aimed at providing an all-inclusive framework which will serve as a guide to the decentralization of the power sector in order to encourage private investment and build a competitive electricity market.
Essentially, states, private companies and individuals are now legally permitted to generate, transmit and distribute electricity.
However, the Act prohibits interstate or transnational electricity distribution and
generating companies are mandated to either generate or purchase electricity from renewable sources or procure instruments for generating renewable energy.
Over the past decades, the association stated that Nigerian power sector has encountered much turbulence in its electricity value chain due to poor policy enforcement, over-regulation, instability of gas supply and bottlenecks in its transmission network.
It lamented that its members had been spending fortunes on the generation of electricity from other alternative power sources.
It explained that as the largest energy access deficit in the world, Nigeria’s shortage of electricity supply has been identified as a hindrance to the profitability of manufacturers with an annual economic loss valued at about N10.1 trillion or 2 percent share of the country’s GDP.
“The unfavourable situation has positioned the country among the worst countries to do business with a rank of 171 out of 190.”
However, MAN said the latest development would lead to reduced cost of alternative energy.
It said, “Last year, total amount spent by our members on alternative energy surged from N77.21 billion in 2021 to N144.47 billion.
“If fully implemented to the letter, the new Electricity Act will see to the drastic fall in the cost of alternative energy incurred by our members and we expect this to boost our profit margin.”
MAN added that the Electricity Act 2023 would lead to competitive and lower electricity tariff, because as an advocacy association, “MAN has always pushed for the need to charge cost-reflective electricity tariff to avoid extortion of our members.
The association the latest development would also lead to inflow of Foreign Direct Investment.
“The country’s epileptic power supply is one of the prominent reasons for the relocation of some of our members. Provided the new Act adequately addresses the challenges in the power sector, we are quite optimistic that such development will encourage the inflow of manufacturing FDI, boost the performance of the sector and increase the sectoral contribution to the economy.”
MAN further noted that backward integration and energy security energy is the most vital input of manufacturers, emphasizing that the empowerment of private manufacturing companies to generate their own electricity will unleash massive investment in backward integration activities which will no doubt be a major enabler of energy security within the sector.
However, MAN suggested the following recommendations to the government to avoid truncating the potential benefits of the Electricity Act:
.Tighten the security infrastructure as no investor wants to do business in a terrorized economy.
.Render legal, financial and technical supports to state governments yet to establish electricity market laws.
.State governments should partner with existing agencies and operators in the power sector as the costs of building new power distribution networks can render the investment less lucrative.
.Streamline NERC and states’ regulations to avoid bottlenecks for multistate investors.
Address the uneven distribution of gas to avoid delay in states’ execution of mega-power projects.
.While states concentrate on small confined democratized power supply systems, there is need to have in the pipeline a long-term plan of ensuring operational efficiency of the national grid.
.The success of the Act largely rests on its effective implementation. Therefore, new President should appoint a committed and incorruptible Minister of Power that has broad experience of the operations and politicking within the power sector.
.The power sector is highly capital-intensive. Therefore, there is need to reduce the lending rate to encourage private investments in min-grids and renewable energy.
.Quickly and adequately address the hitches surrounding the fuel subsidy removal by providing transparent palliative measures and socio-economic infrastructure that directly and immediately mitigate its untold hardship on businesses and the masses.
