Power outages in Nigeria force manufacturers into costly alternative sources of electricity
THE Manufacturers Association of Nigeria, MAN, has said that the instability in electricity supply in the country has continued to make businesses to look inwards through independent power generations. A new survey conducted by MAN stated that the expenditure on self-generated energy in the manufacturing sector increased from N58.82 billion in 2015 to N129.95 billion in 2016.
The report of the survey just released showed that the sector spent N71.13 billion more on independent power generation in 2016. A further analysis of the report indicated that manufacturers spent N66.99 billion on independent power generation in the second half of 2016 as against N29.48 billion spent in the corresponding period of 2015, showing an increase of N37.51 billion.
It also increased by N4.03 billion when compared with N62.96 billion recorded in the preceding half of the year. The report revealed that the share of energy for the sector stood at 36 percent, and the supply averaged eight hours. It stated that the rising expenditure on independent power generation and arbitrary increase in electricity tariffs were responsible for the high cost of production in the sector.
This, it noted, made it difficult for made-in-Nigeria products to compete well with imported goods in terms of pricing. The association, in the report, noted that the macroeconomic terrain in 2016, especially in the first half of the year, was highly volatile. It further described the acute shortage of foreign exchange, high lending rate and exclusion of some vital manufacturing raw materials from the official foreign exchange market as major economic problems during the period, adding that the situation was made worse by the declining household consumption due to inflationary effect on real time income.
The preferential forex allocation to manufacturers by the Central Bank of Nigeria, CBN, according to the association, was however the turning point in the second half of 2016. This was because the forex allocation was able to support the various investments already made locally for the development of raw materials and production, to a large extent. “This, in fact, was responsible for the production momentum gained in the economy in the second half of the year,” the report said.
Among other recommendations, MAN advised the government to re-visit the power sector reform and fully implement the power sector road map to improve the efficiency of the generation, transmission and distribution companies. It urged the government to re-classify manufacturing sector into strategic gas users from the current commercial classification.
MAN stressed the need to ensure proper settlement of acquired properties such as land for electricity equipment installation to avoid venting of anger that would lead to destruction of the infrastructure.
Meanwhile, even with the steady expansion across both manufacturing and non-manufacturing sectors as revealed by the latest Purchasing Managers’ Index, PMI, more manufacturers are expected to go off-grid as part of measures to reduce production costs and enhance competitiveness. The MAN is hoping to increase the number of its members on its own Independent Power Project, IPP, scheme in Makun industrial cluster on the Lagos/Ibadan corridor before the end of 2017.
It hopes to use the Manufacturers Power Development Company, MPDC, as a vehicle to achieve the gradual transition from dependence on distribution companies for electricity to its IPP. Already, it is expected to seal the Power Purchase Agreement, PPA, with ASB Valiant Company this month, to ensure that there is a smooth transition to alternative power solution as well as ensure that its members’ electricity needs are met.
Aug 11, 2017 @ 1:00 GMT