Follow Us on Google
Charles Nwaoguji,[email protected]
Manufacturing business in Nigeria is beset with challenges; top among which is inadequate power supply. To survive and run a seamless operation, most of the firms now rely on “emergency” power generators which often balloon their overhead costs.
Over the years, the cost of running generators remained a major challenge facing manufacturing sector.
According to Mansur Ahmed, president of the Manufacturers’ Association of Nigeria (MAN): Nigerian manufacturers cannot be competitive, as long as they continue to generate their own power as whatever is produced in the country would come at a higher cost compared to other parts of the world.
The same scenario goes for the transportation system as we still move our goods via roads, including heavy duty goods which should go by rail.
He called for the development of the nation’s transportation sector to the point where it can support the manufacturing sector and the economy as well.
A 2014 report on the Nigerian manufacturing sector released by the National Bureau of Statistics (NBS) puts the challenges plaguing the nation’s manufacturing sector to include inadequate and epileptic power supply, high taxes, poor infrastructure, and supply variable rain-dependent agricultural inputs. It however listed some of the sector’s strengths, to include cheap labour, buoyant domestic demand, in addition to the availability of some raw materials locally. Without adequate power supply, the economic hardship currently being experienced by many Nigerians may not ease soon as most businesses and operations are planning to shut down owing to lack of fund to power their generating sets.
As a result of this challenge big and small businesses too many to mention have become moribund over the years in Nigeria according to the Chairman, Manufacturers Association of Nigeria, Kwara/Kogi states Branch, Mrs. Omolola Olabayo, who noted that many several companies had collapsed due to acute power shortage.
Olabayo ,warned that many more will follow suite in the next few months if the power situation does not improve.
She recalled the case of Dunlop Nigeria Plc, the tyre manufacturing giant that collapsed under the weight of power shortage among other factors.
Dunlop moved its production line out of Nigeria in 2006 leaving an N8billion tyre manufacturing plant, and other facilities in its Oba Akran Road, Ikeja complex, lying fallow.
After over four decades of production in Nigeria, Dunlop could not continue paying over $800,000 annually on self-generating electricity and paying half the amount as tariff for grid-supplied power, which was at best very erratic.
Unfortunately a plant with a capacity to produce 300,000 tyres per annum and keep several thousands of Nigerians employed became a yesterday’s pride. Perhaps, other factors had contributed to the troubles of the company; it probably could have survived if power supply had been stable.
It is no longer a secret that majority of the multinational fast moving consumer goods industries have relocated a significant part of their production activities to neighbouring countries because of the acute power deficit Nigeria is facing.
The unfortunate situation is also denying the country of inflow of investment in critical areas. For instance, a major telecoms equipment manufacturer chose Ghana ahead of Nigeria for the location of a regional technology hub because of the former’s electricity quagmire. Whereas, its biggest customers are in Nigeria. The major challenge is inadequate supply and exorbitant cost of generating electricity. Energy cost constitutes about 40 per cent of production cost which is the reason Nigerian products are not competitive.
For instance, the average number of power outages per day across MAN industrial zones in 2014 is five times, while that of the number of hours that electricity was supplied per day was six hours in 2014. These are the major constraints that impede competitiveness and exert overbearing pressure on the bottom-line of manufacturing concerns.”
MAN, claimed that electricity generation showed slight improvement in Q1, 2015 hovering around 4,000MW. It, however, decried that transmission and distribution of available electricity output were abysmal due to long time of systemic infrastructure decay.
These scenarios, MAN lamented, contrast with the huge energy need of the industrial sector including manufacturing. To manufacturers, the promise of adequate and stable electricity for industrial production as embedded in the objectives of the power sector reform remains regrettably elusive, according to Jacobs, a former president of MAN.
The review document said, “Ironically, in spite of the poor energy situation in the country, the Nigerian Electricity Regulatory Committee has maintained increase in electricity charges not considering its implication on the economy, especially the productive sector.
The National President, Association of Small Business Owners of Nigeria, Dr. Femi Egbesola, for his part said though access to finance is the most talked about challenge facing SMEs in Nigeria, erratic power supply remains major drawback limiting SMEs growth in the country. While some list erratic power supply among the first 10 challenges facing entrepreneurs, I see it as the number one or the main of all challenges facing us.
According to him, the impact of the power crisis is such that the extra funds spent on the alternative sources of power supply increases the cost of production thus raising the market costs of products and services.
This, he explained, could make the products to underperform in the market if there are similar products in the market imported from countries with regular power supply.
For SMEs, Egbesola said power crisis increases the cost of starting a new business or running an already existing one in the nation. He said, “It becomes more difficult considering the financial constraints and difficulty in accessing start-up funding. This has stifled life out of many businesses and with the overall effect of reducing the SMEs contribution to the nation’s GDP.”
