Seven benefits of new electricity bill for manufacturers

The Manufacturers Association of Nigeria (MAN) has highlighted seven potential benefits the new electricity bill holds for the manufacturing sector if well implemented.

In a statement on Thursday, the association said the bill, which will be a game changer for the sector, will reduce cost of alternative energy, improve inflows of Foreign Direct Investments and manufacturing performance, increase in Internally Generated Revenue, improved infrastructure and less tax burden on manufacturers.

Others are competitive and lower electricity tariff, more investment in renewable, backward integration and energy security, stable power supply and proper planning.

“Indeed, the signing of the bill is a major step towards the right direction. Following the removal of subsidy, this is another reflection of the boldness and commitment of the new administration towards the diversification and decentralisation of the power sector,” it said.

It said the empowerment of the state governments and private investors, the adoption of renewable energy and the reformation of the governance structure of the power sector are capable of driving investment, improving electricity access and fostering economic growth.

“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 two percent share of the country’s GDP,” it added.

Last week, President Bola Tinubu assented to the electricity bill, which was passed in July 2022 seeking to repeal the Electricity and Power Sector Reform Act, 2005, and thus becoming the Electricity Act.

The Act now consolidates all legislations dealing with the electricity supply industry to provide an omnibus and ideal Institutional framework to guide the post-privatization phase of the Nigerian Electricity Supply Industry and encourage private sector investments in the sector.

The primary aim of the bill, as stated in its very first section, is to create a comprehensive legal and institutional framework to guide the Nigerian Electricity Supply Industry.

It de-monopolises the generation, transmission, and distribution of electricity at the National level, to empower States, companies and individuals to generate, transmit and distribute electricity.

States would also be able to issue licenses to private investors who have the ability to operate mini-grids and power plants within the State, but such State licenses are not to extend to inter-state or transnational distribution of electricity.

“In light of the huge energy deficit occasioned by the age-long challenges in the power sector, the president has set the ball rolling by signing the Act which is meant to be a game changer to address the numerous constraints within the sector,” manufacturers said.

Over the past decades, the 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.

According to Segun Ajayi-Kadir, director-general of MAN, these problems have culminated into erratic electricity supply, frequent power outages and persistent collapses of the national grid. “For many years, the situation has stunted the growth of the economy. Consequently, access to electricity has remained a hurdle for millions of Nigerians,” he said.

Data from the International Energy Agency show that Nigeria’s 86 million is the largest number of people in the world without access to electricity. Last year, manufacturers spent a total of N144.47 billion on alternative energy, an increase of 87.1 percent from N77.21 billion in 2021.

In order to avoid truncating the potential benefits of the electricity Act, MAN recommends tightening the security infrastructure as no investor wants to do business in a terrorized economy and render legal, financial and technical support 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,” it said.