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How deplorable power supply stifles investments in Nigeria

By Sabastine Obasi

Chimago Nnodim, a young entrepreneur and native of Umuokisi, Amuzi, in AhiazuMbaise Local Government Area of Imo State has always had a dream of investing in his native land, to provide jobs to the teeming unemployed youth and contribute to the economic growth of his community.  With a loan from Stanbic IBTC, he established a sachet water producing factory, bought a Dyna truck for distribution and employed 10 young people for a start.

Three years down the line, his plans for expansion and more employment appear to be a mirage due to deplorable power supply in the area. Nnodim told Sweetcrude that he uses 10KVA generating set, which he powers with 25 litres of diesel, three times a week, while he produces about 1,300 bags of sachet water. At the cost of N200 per litre, he spends about N15, 000 weekly on diesel alone.

“The deplorable power situation forced me to use generator always. We hardly get electricity from Enugu Electricity Distribution Company, EEDC. In fact, we get electricity about two times in a week, if we are lucky. Even when there is electricity, it does not last more than two hours. Worse still, it fluctuates, as there is low voltage. Consequently, there are leakages in our production. That is our predicament in this community.’’

Nnodim further explained that he is being discouraged by the excruciating cost of production. “Our creditor is on our neck. We need to pay back our loan. The situation is really frustrating. How can somebody invest in this kind of economy?” he asked rhetorically.

Dr.TejuBolujoko, Managing Director, Ruch Investment and Manufacturing Limited, manufacturer of Mater Tea and other herbal products at Adesan, Mowe, Ogun State, shares a similar predicament. He spends a minimum of N150, 000 a month to power his generators because Ibadan Electricity Distribution Company hardly supplies electricity to the company.

“If there is stable power supply, we cannot spend more than N50, 000 a month. Power supply is our major setback. Without resolving the power situation, the country cannot make any headway,” he said.

To drive home the damage done to investments by the despicable power situation, he said, “Some years ago, a Nigerian in Diaspora came home to establish a manufacturing company in the country. Unstable power supply was his major headache. He had option of establishing in Ghana, where power is stable. He was not happy he could not invest in his country. Out of frustration, he left the country,” Bolujokosaid.

He lamented that in a situation where a manufacturer spends about 25 percent of his budget on power generation makes him vulnerable as he cannot compete favourably with his counterparts abroad. On the way out, he stated that focus should be on renewable energy such as solar. A country like China depends so much on renewable energy. That is why they are fast developing. Nigeria should be an exporting country instead of importing. As it is, we are exporting jobs instead of developing what we have. I really feel sad,” he added.

For TemitopeOgundolapo, Founder and Creative Director of KievaDesuwa, a Lagos-based shoe manufacturing company, power supply in the country is frustrating.  “It is terrible. We end up using most of our profits to buy diesel to make sure we meet up with our operations. We spend between N30, 000 and N40, 000 every week. It has a negative effect as our cost of production is on the high side.

“The government has to wake up to this situation and make it a priority to be solved. Nigerian businesses have gone under because of increasing costs to stay afloat. I believe once the power situation is resolved, there will be more room for growth in the Nigerian manufacturing industry,” she added.

The above scenarios aptly capture the predicament of manufacturers in Nigeria. Despite the privatisation of then Power Holding Company of Nigeria, PHCN, power supply has become more of a nightmare to the citizenry. While majority of the people have resigned themselves to fate, the negligible that can afford generating sets are meant to spend highly to have power supply. Worse hit appears to be manufacturing sector, a good number of whose members have closed shop due to the deplorable power supply issue. Consequently, thousands of jobs have been lost.

Some of the companies are known to have relocated to neighbouring West African countries such as Ghana and Benin Republic, where electricity is stable. The situation has also discouraged prospective investors who would have cashed in on Nigeria’s huge population to invest in the country.

Erisco Foods Limited, an indigenous tomato paste manufacturer, relocated its $150 million tomato paste processing plant to China mid-2017. It had a production capacity of 450,000 metric tons of tomato paste annually and had 22 brands with over 2,000 workers in Nigeria. Eric Umeofia, the chief executive officer, Erisco Foods, said the company relocated to the friendlier business environment after losing over N3.5 billion in Nigeria.

Data from the Manufacturers Association of Nigeria (MAN), stated that capacity utilisation moved up from 44.3 percent in 2016 to 55 percent in 2017 which shows an improvement in production but with a caveat – that all the benefits could be wiped off due to power scarcity. It could be recalled that the Minister of Power, Works and Housing, BabatundeFashola, said 7,000 megawatts was being generated from the national grid but the distribution companies (Discos) distributed only 2,981 megawatts.

However, the President of MAN, Frank Jacobs, said that member companies spent N20.8 billion monthly on power generation to run their production processes. He explained that the ripple effects of the power shortages and constant outages were numerous, ranging from cut down on production, job losses to outright closure or relocation to other countries by industries. He added that companies had to bear so many losses as the outage often occurs when goods are in the middle of production.

“Members of MAN have resorted to generating power privately and completely cut off their operations from the national grid,” Jacobs said. According to him “Most companies, such as Coca-Cola, Wempco, Nigeria Flour Mills and especially the multi-nationals self-generate their power. They don’t rely on the national grid.”

He is not alone. The Director General of the Nigeria Employers Consultative Association (NECA), Mr.SegunOshinowo, also said that generating alternative power to run the manufacturing sector is very expensive as it increases the cost of production. He explained that: ‘’as Nigerian companies operate in the global market, the effect of incurring high cost on power generation no doubt would make the nation’s manufacturing sector less competitive.

“The products which our companies would be churning out would be competing with others coming from abroad whose countries have good infrastructure. Definitely, the prices of those products coming from outside will be cheaper, while ours will be higher and less competitive due to cost of production. The same goes for those companies exporting their products, it will still be less competitive and it is really a serious problem.’’

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