The Manufacturers Association of Nigeria (MAN) has issued a warning that more manufacturing companies might relocate from Nigeria if the tariff regime is not improved. The unpredictable foreign exchange rates and ongoing power crisis have already caused several international manufacturing firms to exit the country.
MAN President, Francis Meshioye, expressed concerns about the high cost of alternative energy sources, which amounted to over N144 billion for manufacturers in 2022 alone. He emphasized that any further tariff hikes would lead to an exodus of companies and called on the government to reconsider its approach.
Meshioye highlighted the challenges faced by manufacturers in Nigeria, including the high cost of doing business, the need to provide essential infrastructure, and the downsizing of businesses. He emphasized that the power issue, among others, has prompted international businessmen to relocate their operations.
MAN’s data indicated that manufacturers spent at least N144.5 billion on alternative energy in 2022, representing an 87% increase compared to 2021. In the past eight years, electricity tariffs have risen by 186%. The association criticized the proposed 40% tariff hike as outrageous, especially considering the government’s outstanding N75 billion electricity bill.
Meshioye also mentioned the unpredictability of the foreign exchange rate as another factor that could lead to manufacturers exiting Nigeria. He stressed the importance of a predictable forex environment for businesses.
Despite these concerns, President Bola Tinubu has assured genuine local and foreign investors of his administration’s commitment to providing a conducive business environment. During a meeting with investors from France and Japan, pledges were made to invest $5 billion in the floating Liquified Natural Gas sector, which is expected to generate thousands of direct and indirect jobs.
The investors from Technip Energies (France) and JGC Corporation (Japan) were directed by the president to prioritize the project and report any challenges encountered during implementation. The project, in collaboration with NNPC Ltd and Afrexim Bank, aims to have a 300,000-tonne capacity of LPG per annum and meet 25% of local demand for gas. Local content development is being emphasized, with training programs for Nigerians and the establishment of plants for product delivery and marketing.
Overall, MAN’s concerns about the tariff regime and energy costs are urging the Nigerian government to take action to retain manufacturing companies and promote a favorable business environment.