• High electricity tariff will deny Nigeria benefits, say manufacturers

With the commencement of the African Continental Free Trade Area (AfCFTA) agreement on January 1, 2021, analysts and stakeholders have expressed optimism of Nigerian banks readiness, saying the financial sector stands to benefit most from the continental agreement.

The analysts, in separate interviews yesterday with Flavision, added that with most Tier-1 banks already operating in many African countries and are continually expanding, that give them an edge over their counterparts in other African countries.

They added that with the increase in trade that would spur economic activities and increased lending, many banks are already in a liquid position to take advantage of AfCTA.

However, manufacturers have warned that Nigeria’s gains from AfCTA may be eroded with the current high electricity tariffs.

The immediate past President of the Chartered Institute of Bankers (CIBN), Mr. Uche Olowu, said Nigerian banks with more trade will be in a better position to increase lending to the real sector which in turn will spur economic activities.

He said:

Banks are ready especially as banks have procured good lines that would support trading and supporting manufacturers, exporters, Nigerians products, which would thereby jumpstart economic activities. Nigerian banks are liquid and are prepared to lend out to those channels and outlets to serious manufacturers because it poses great opportunities for Nigerian banks and the Nigerian economy. Banks are there to intermediate and they have the information, data and all that it takes to support Nigerian businesses that are serious and credit worthy.

Also, the President of Risk Management Association of Nigeria, (RIMAN) Mr. Magnus Nnoka, told THISDAY that Nigerian banks are well capitalised and have outlets across Africa which put them at an advantage.

Nnoka said:

We are amongst the most prepared country from the financial services point of view. Apart from a few banks in Egypt and South Africa, Nigerian banks are reasonably capitalised compared to other African countries.

I think Nigerian banks, given their size today and given their track record, are prepared and positioned to attract partnerships that would also facilitate trade within the African block.

According to the Chief Executive Officer, Eczellon Capital, Mr.Diekola Onaolapo, with great gains there is also need to increase risk management strategies.

He said:

On the surface, it should increase opportunities for banks because increased trade naturally means increased requirements for financing from banks and customers. So that is opportunity for growth area for them, however, given the nature of the trade agreement in which there is access to a much larger market, it however means increased risks for banks. As banks approach the opportunities that is presented by the AfCTA, they also need to ensure that their risk management framework is bolstered to be able to embrace the additional challenges that is going to come with it.

On his part, the Head of Consulting, Agusto Consulting Limited, Mr. Jimi Ogbobine, said:

In terms of the AfCTA, the Nigerian banking industry is better prepared than their counterparts, especially in Sub-Saharan Africa. They are more prepared than banks from Ghana, Kenya and maybe it is the South African banks that can give them a challenge in terms of exploiting AfCTA. But outside South African banks, Nigerian banks are the most prepared, especially when you are using footprints across the continents and for South Africa.

MAN: High Electricity Tariff Will Deny Nigeria Benefits of AfCFTA

The Manufacturers Association of Nigeria (MAN) has described the revised Multi Year Tariff Order (MYTO) for January to June 2021, with the upward adjustment from N2.00 to N4.00 per kilowatt per hour of electricity as unfriendly to the Nigerian manufacturing sector.

The association also called for the suspension of the latest increase, saying that the recent increase in electricity tariff is ill-timed and will exacerbate the already high manufacturing cost environment, worsen competitiveness, further depress productivity in the sector and might exclude Nigeria from the list of beneficiaries of African Continental Free Trade Area (AfCFTA).

MAN, in a statement yesterday on the recent increase in electricity tariff, and signed by its Director-General, Mr. Segun Ajayi-Kadir, said:

It appears to be insensitive to the prevailing precarious situation of the sector. The increase is coming at a wrong time and would clearly reverse the little gains in the recent past. This is against the background of prevailing harsh operating environment, the increasing burden of taxes, the enormous spending on self-generated electricity up to the tune of N70 billion (excluding hundreds of billions Naira spent on settling monthly electricity bills) and the ailing state of a sector that is just recovering from a lockdown occasioned by the ravaging Covid-19 pandemic.

Ajayi-Kadir stated that the increase in electricity tariff would decrease the manufacturing sector ability to earn foreign exchange due to increasing costs of production that would render their products uncompetitive.

The MAN also described at the use of inflation, foreign exchange rate and gas price as justifications for the increase in tariff as weak and debatable.

Justin Nwosu

Justin Nwosu is the founder and publisher of Flavision. His core interest is in writing unbiased news about Nigeria in particular and Africa in general. He’s a strong adherent of investigative journalism, with a bent on exposing corruption, abuse of power and societal ills.