…Alternative energy gulps N676.6bn in H1

By Merit Ibe

Despite a fragile national power grid, unreliable supply and surging energy costs, Nigeria’s manufacturers have remained resilient, flaunting renewed confidence in the midst of austerity resurgence.

Collectively, they spent about N676.6 billion on alternative energy and N1.72 trillion on raw material imports in the first half of 2025 (H1’25).

These costs, described as unsustainable, have worsened profitability and led to 18,935 job losses within the same period.

However, despite these challenges, the Manufacturers’ Confidence Index (MCCI) rose marginally to 50.7 points in the third quarter of 2025 (Q3’25) from 50.3 points in the previous quarter, indicating cautious optimism among industry players.

The latest Manufacturers’ CEO Confidence Index report attributed the huge energy expenditure to rising diesel and gas prices, as well as persistent power supply inconsistencies across industrial zones. This situation, it noted, has forced many manufacturers to invest heavily in self-generated power systems such as generators, solar panels and inverters just to keep production lines running.

According to experts, Nigeria’s manufacturing landscape remains a high-cost battlefield with no succour on the horizon.

“Reliability remains a major concern,” lamented MAN’s Director-General, Segun Ajayi-Kadir, who warned that the escalating cost of alternative energy was eroding profitability across all sub-sectors.

“Unless Nigeria achieves consistent and affordable power supply, the manufacturing sector will remain stifled by unsustainable energy expenses,” he added.

Ajayi-Kadir noted that the current trend threatens the nation’s industrialisation drive and long-term economic stability. He urged the Federal Government to act decisively, saying: “The growing cost of electricity, both from the grid and self-generation, highlights the urgent need for comprehensive power sector reforms, improved distribution and deliberate intervention to stabilise energy prices.”

He outlined MAN’s key recommendations: review electricity tariffs for industrial users, incentivize investment in renewable energy, upgrade the national grid for reliability, promote local production of energy-efficient equipment, and suspend further tariff hikes that have reached “100 percent of the base price.”

Tariff strain despite longer supply hours

Interestingly, MAN’s data showed a modest improvement in power availability to industrial clusters, average daily supply rose from 10.6 hours in 2023 to 13.3 hours in 2024 and from 11.4 hours per day in H1 2024 to 15.2 hours in H2.

Yet, this modest progress was offset by skyrocketing costs. Electricity tariffs for Band A customers reportedly surged by more than 200 percent, following new pricing rules approved by the Nigerian Electricity Regulatory Commission (NERC).

Ajayi-Kadir described the tariff increase as “crippling,” noting that the financial pressure on manufacturers has reached a breaking point.

“While supply hours may have improved, the cost implication is crippling, worsening the financial strain on industries,” he said.

He stressed that manufacturing “remains the backbone of any sustainable economy,” insisting that “without energy security and affordability, industrial growth will remain an uphill task.”

Despite marginal gains in supply hours, the report indicated that manufacturers still faced an average of four power outages daily in 2024, the same as in 2023. A slight improvement was recorded in the latter half of the year, with outages dropping to three times per day.

To cope, companies have been forced to invest in costly backup systems, ranging from high-capacity generators and UPS units to solar panels and spare parts, further inflating operational costs.

Diesel prices alone jumped by 53.54 percent in 2024, while gas prices “remained stubbornly high,” according to the report. Even with the global decline in energy prices, domestic manufacturers saw no relief.

MAN President, Francis Meshioye, linked the sector’s difficulties to broader infrastructure failures, poor logistics, congested ports, and inadequate transport networks that amplify production costs.

“Frequent power outages, high logistics costs, and infrastructure bottlenecks continue to choke competitiveness. Investments in infrastructure, especially energy access, remain crucial to lowering production costs and boosting output. Without affordable and stable electricity, manufacturers cannot thrive, and Nigeria’s dream of industrial growth will remain elusive”, Meshioye said.

He called for an integrated policy framework that combines tariff reform, renewable energy expansion, and large-scale investment in transmission and distribution.

“The government must work closely with the private sector and development partners to build a stable energy ecosystem that supports productivity, job creation, and export growth,” Meshioye urged.

He warned that failure to act decisively could trigger “factory shutdowns, job losses, and a further decline in local production capacity,” deepening Nigeria’s dependence on imports.

Confidence index shows cautious hope

Amid these daunting realities, there is a faint silver lining. The Manufacturers’ Confidence Index (MCCI) edged up to 50.7 points in the third quarter of 2025, from 50.3 points in Q2, crossing the 50-point threshold that separates pessimism from optimism.

Ajayi-Kadir described the 0.4-point rise as small but significant. “While the increase may appear marginal, it is important because it points to cautious optimism that the sector is beginning to find its footing after a long period of turbulence,” he noted.

The improvement marks the second consecutive quarterly increase in the index, suggesting that manufacturers are regaining modest confidence despite economic headwinds.

MAN’s Director of Research and Economic Policy, Dr. Oluwasegun Osidioe, however, cautioned that the recovery remains “fragile and vulnerable.”

“Real output growth slowed to 1.6 percent in Q2 2025, with the sector contributing 7.81 percent to GDP, down from 9.62 percent earlier,” he said.

Osidioe argued that sustaining the modest recovery requires “policy consistency and exchange rate stability” to consolidate the gains so far recorded.

Analysts believe the energy crisis remains the biggest obstacle to Nigeria’s industrial resurgence. The N1.11 trillion manufacturers spent on self-generated power in 2024 dwarfs what many African economies spend on national grid expansion annually.

It also reflects years of policy inertia, inadequate power sector investment, and the high cost of doing business in Nigeria. For manufacturers, energy is no longer just a cost component, it has become a survival line.

Ajayi-Kadir said: “Nigeria’s manufacturing sector is fighting hard to stay alive, but without reliable and affordable power, its progress will continue to be painfully slow.”

The modest uptick in confidence shows resilience in the face of adversity. But for that optimism to translate into real growth, the government must deliver on long-promised reforms, ensuring that factories can power up without breaking down financially.

Until then, the N676.6 billion manufacturers spent in H1 to keep the lights on will remain a stark reminder of an industrial sector surviving against the odds, and waiting for power that truly empowers.