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By Merit Ibe, [email protected]
As it has become clear that the national grid cannot meet the electricity demand of the consumers, the Lagos Chamber of Commerce and Industry (LCCI) has called for transition to renewable energy.
The chamber noted that this source of energy is the most sustainable solution to Nigeria’s power shortage, which has disrupted gas supply, with distribution companies lacking the capacity to take up power generated by the Gencos and the challenges of achieving 100 per cent metering for power consumers.
According to its President, Michael Olawale-Cole, who made the remark during a press conference on ‘The state of the economy’ said on the back of these challenges, businesses have had to deal with the rising cost of manufacturing, exorbitant logistics and constrained production.
“With the cost of diesel at record levels and persisting poor power supply, businesses are running on unsustainable costs and producing at uncompetitive prices.”
Olawale-Cole lamented that the power issue could lead to job losses as output is constrained due to the unbearable cost of production, adding that if not quickly tackled, these challenges could subdue the GDP growth and projections for 2022.
The chamber, therefore, recommended that government should invest more in technology to fight pipeline vandalism; create funding for critical infrastructure and special purpose intervention in the power sector.
According to the president, the newly launched Infrastructure Corporation of Nigeria (Infracorp) has a mandate to focus on power, renewables, transport and logistics.
“The InfraCorp will succeed in mobilising private sector participation if we can achieve cost-reflective pricing in the power sector. The gas-to-power infrastructure requires an overhaul to resolve the persisting gas shortage. However, the most sustainable solution to Nigeria’s power shortage is the transition to renewable energy.”
On the ongoing Russia-Ukraine conflict, which has triggered a positive oil price shock with spillover effects on operating costs, raw materials and inflation in countries that are not directly engaged with the war, he said Nigeria is not an exception as prices of goods and services are moving northward with the potential implication of shrinking production of goods and services.
“The worsening security challenges in many parts of the country are another serious threat to the agricultural and manufacturing value chain, which is capable of reducing production and contracting these sectors.
If the above conditions persist, the LCCI boss said production volumes would be impacted by raw materials supply chain disruptions caused by the war, the rising cost of diesel and other internal security crises.
“Job losses are also very likely due to constrained production and disrupted supply chains. All of these will likely depress growth potential in Q2 2022.
He projected that, going into the second quarter of 2022, the manufacturing sector will likely suffer some shocks from the rising cost of diesel, logistics, foreign exchange illiquidity, domestic inflationary pressure, weakening purchasing power, poor public infrastructure and port-related challenges as these may continue to present as headwinds to the sector’s performance.
Olawale-Cole recommended that to sustain the pace of recovery in 2022 and navigate through the rising uncertainties in the global economy requires well-coordinated fiscal and monetary policies in promoting growth-enhancing and confidence-building policies that would encourage private and foreign capital inflows into the economy.
He said government needs to look for ways to resolve the lingering fuel supply crises by increasing importation to meet growing demand which is putting pressure on diesel and fuel prices. It has also become imperative now that Nigeria needs to have reserves for these critical commodities which can be accessed to meet sudden crashes in supply.
“We have always advocated for the removal of fuel subsidies and that such rescued funds be diverted to subsidise the production of goods and services in the face of the rising cost of manufacturing.
The Central Bank of Nigeria (CBN) should embark on easing the economy while keeping a tab on controlling rising prices. Credit to the private sector should increase and be targeted to support growth sectors and export-promoting sectors.
“The growing uncertainty is driven by the war in Ukraine, degenerating security crises, and difficulties around the sourcing of FOREX for the importation of raw materials.
“The CBN needs to initiate a gradual transition to a unified exchange rate system and allow for a market reflective exchange rate.”
