Nigeria’s manufacturers are spending more on diesel, gas, inverters, UPS and other alternative energy sources, indicating poor levels of power supply across Nigeria.
Local manufacturers spent N66.03 billion on alternative energy sources between January and June 2017, as against N62.96 billion expenditure made in the same period of 2016, according to a latest report prepared by the Manufacturers Association of Nigeria (MAN), sent to BusinessDay.
The largest chunk of expenditure went to diesel, which occupied 39.4 percent of the total. While N26.02 billion was spent on diesel, N21.35 billion was expended on procuring new generators within the period.
Also, manufacturers spent N17.75 billion on gas, while N906 million was for inverters, UPS, and other power storage and purifying gadgets.
“Energy shared 36 percent of the total cost of production in the manufacturing sector within the period. This accounts for the poor competitiveness of made-in-Nigeria goods,” MAN says.
The report shows that the average daily electricity supply in H1 of 2017 declined to five hours, from seven hours supplied in the corresponding period of 2016 and eight hours in the preceding half.
Poor power supply ranks among the biggest challenges facing Nigerian manufacturers, which also include lack of or limited availability of good transportation systems, water, credit and high taxes.
Diesel is mainly used by small and medium manufacturers, while large enterprises, including conglomerates and multinationals, use gas plants.
Aliko Dangote, president of Dangote Group, installed coal-fired plants for his cement factory in 2016, and urged large enterprises with financial muscles to do the same. Coal is cheaper than gas, diesel and Low-Pour Fuel Oil (LPFO).
Gas is however subject to availability. Early this year, the Escravos-Lagos Pipeline (ELP), a natural gas pipeline, which supplies gas from Escravos region of the Niger Delta area to Lagos, was ravaged by fire, shrinking the levels of gas available for manufacturers.
Gas users contend that dollarising the product is not in the interest of manufacturers who are scrambling for dollars to import inputs.
“There is a need to review the pricing policy of gas companies which prescribe payment in dollars for gas used by industries,” Babatunde Paul Ruwase, president, Lagos Chamber of Commerce and Industry (LCCI), said at the State of the Nation press conference in Lagos on January 24.
“We believe this is not consistent with the objective of promoting industrialisation, economic diversification and job creation. Most manufacturers are producing for the domestic market; it is therefore inappropriate to compel them to pay for gas in dollars,” Ruwase said.
Similarly, manufacturers are increasingly abandoning power distribution companies popularly called DisCos for private companies that can provide 24-hour incremental and quality electricity at cheaper rates.
Already, the Manufacturers Association of Nigeria, through its recently formed MAN Power Development Company, has signed an agreement with Tower Energy Solution & Systems Limited for the supply of six to 10 megawatts (MW) of electricity to Henry Carr Industrial Cluster in Ikeja, Lagos.
MAN has an agreement with Negris Group for the supply of up to 80 MW of electricity to Odogunyan in Ikorodu industrial cluster.
The organisation is also talking with solar power supply firms in the northern Nigeria, where there is limited gas supply, to enable clusters in Kaduna, Kano and other parts of the north to have incremental power at cheaper rates. Similarly, a negotiation is on the pipeline with Sahara Energy, Geogrid LighTec Limited and other companies for the supply of power to industrial clusters, according to Ibrahim Usman, chairman of MAN Power Development Company Limited.
“The idea is to be able to put manufacturers together in clusters and arrange for power, which can be supplied through providers that will engage in power supply through hydro, solar, gas and will remove the cost of manufacturers getting involved in producing their own power, “ said Reginald Odia, chairman of Economic Policy Committee of MAN and director of the MAN Power Development Company.
