3 December 2012

Nigeria: New Electricity Tariff Stifling Small Businesses - Study

Photo: Vanguard
Electricity in Nigeria

Lagos — A study on the Multi Year Tariff Order (MYTO), which introduced by the government and saw electricity bills rising to over a 100 percent high, is stifling small and medium scale business across the country, a study has shown.

The study which examined 'the effects of the MYTO II policy on MSMEs in Nigeria was commissioned by the Nigerian Association of Small and Medium Enterprises (NASME).

It concluded that SMEs in the manufacturing sector have experienced increased electricity tariff ranging from 70 percent to 440 percent per month.

On average the study said, "Manufacturing SMES have experienced an increase of 118.6 percent since the inception of the MYTO II."

NASME commissioned the survey to provide empirical evidence on the impact of MYTO II on the businesses of NASME members in particular and businesses in general.

In 2008, the Nigerian Electricity Regulatory Commission (NERC) established a methodology for regulating electricity prices called the Multi-Year Tariff Order (MYTO) on the principles of cost reflectivity and affordability.

The Multi Year Tariff Order (MYTO) provides a 15-year tariff path for the Nigerian electricity industry with provisions for minor reviews each year based on a number of parameters (such as inflation and gas prices), and major reviews every 5 years, when all of the inputs are reviewed with stakeholders.

Based on the complaints of small businesses about the costs of the new tariff regime and implications on businesses, NASME commissioned NOI Polls Limited, to conduct an assessment of the impact of MYTO II from November 6 to 12, 2012. 138 businesses were interviewed and 127 interviews were completed across the six geopolitical zones.

"Some other findings suggest that MSMEs have a very negative perception about the MYTO II tariff since its introduction. This arises from the fact that they are experiencing declining profit margins which they attribute to a rise in their total operating costs," the research findings made available to our correspondent in Lagos said.

The findings also say, in spite the increase in electricity tariff, erratic power supply is still a constant feature from the Power Holding Company of Nigeria and has led to even more increased use of alternative power supply and driving operating costs to record highs.

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