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By Merit Ibe [email protected]
Nigeria’s business environment is becoming more challenging with constant power supply and energy disruptions.
Over the past few years, private sector operators are lamenting the huge energy costs are negatively impacting production of goods and eating up their profitability.
For most manufacturers, the daunting macro-economic challenges in the country, having been compounded by lack of foreign exchange for critical raw materials, may lead to further hike in product prices.
Though most manufacturers have remained cautious given that challenges of many households are facing to survive, a hike in price could mean substitution for cheaper imports and other inferior alternatives.
However, experts have urged the Nigeria manufacfacturers to act quickly to counter inflation and preserve profitability as the cost of materials continues to soar.
But as part of measures to offset increasing input costs including raw materials and components to energy, industry stakeholders expect they’ll need to increase prices of their goods and services if only to remain in business.
Already, several local manufacturers have urged the Federal Government to develop sustainable national policy measures against external influences, to mitigate the effect of global headwinds on the economy.
Group Chief Executive Officer, Eat‘N’Go Africa, Mr Patrick McMichael, explained that the amount of money spent on diesel to power its outlets across the country this year (2022) alone is currently over N2 billion.
McMichael said Nigeria business environment is one of the most challenging terrain in the world. He said that the number one belief of the private sector operators’ is that there must be constant supply of energy to succeed.
McMichael explained that the biggest challenge of Eat’N’Go Africa, a leading quick-service restaurant and the parent franchisee to Domino’s Pizza, Cold Stone Creamery and Pinkberry Gourmet Frozen Yoghurt, is the cost of generating prompt electricity to run its store outlets nationwide.
“Number one thing the private sector needs to succeed in business is power. Constant power supply is what this country needs first and foremost and everything else will follow after that. That’s just my view. The power challenge that we face this year, is taking about N2 billion out of our profitability just this year alone.”
Also speaking, Chief Executive Officer, Coleman Technical Industries, George Onafowokan, said higher energy costs would invariably trigger higher prices.
Onafowokan said while little success had been recorded in the area of modular refineries, much more work needs to be done in setting up more structures to ensure a stable supply of diesel.
“Diesel prices are affecting everybody. At N800 per litre, it’s a terrible state. The fact is, there will be higher prices definitely for now, because inflation will also go up and certain production costs are going up. So, if diesel is going up, it will add to the overhead cost of business since majority of manufacturers in Nigeria practically and in real terms use diesel to run their factories. Once your diesel cost has gone up from N300 to N800 per litre and in some parts of the country, N900, it changes the dynamics.
“We do not have enough (modular refineries). I think there is Waltersmith. Modular refineries cannot satisfy your total requirements. You need quite a lot of them. It’s like saying you have smaller units of a big jigsaw puzzle. They need to be encouraged. At least, it is good that we have some, but they are not enough. The demand is still above supply. We are in a country where majority of businesses, homes and commercial spectrum are using diesel. So, you cannot, unfortunately, solve it with just one unit. You need quite a lot of them.”
The Coleman Wires and Cables boss urged the Federal Government to deregulate the power sector in a manner that would promote competition among the power distribution companies.
For his part, Managing Director, Mouka, Mr. Femi Fapohunda, said the high cost of purchasing diesel by manufacturing firms operating in the country is alarming. “I am sure everybody knows the cost of diesel which is now between N800 and N900 per litre depending on who you know and you are talking to, to supply you. But luckily as I said, Mouka has been building into the future even before now. We have started having our original presence by having depots.
