December 5, 2022

Manufacturers’ expenditure on alternative power surges 110%

Manufacturers’ expenditure on alternative power surges 110%

*N67.8 bn spent in the first half of 2022, up from N32.2 bn same period last year

*Manufacturing output growth down from 5.8 % in first quarterto 3.0%

*Demand further investment in power and commit to adding 10,000MW to current capacity

By Yinka Kolawole

As public power supply in Nigeria continues to degenerate, the manufacturing sector’s expenditure on alternative energy source has soared to N67.8 billion in the first half of 2022 (H1’22) about 110 percent, year-on-year (YoY), from N32.2 billion in the corresponding period of 2021 (H1’21).

The Manufacturers Association of Nigeria (MAN) disclosed this in its H1 2022 Economic Review made available to Vanguard over the weekend.

The report indicated an increasing dependence by the nation’s manufacturers on self-generated power supply for their operations.

Commenting on the development, the Director General, MAN, Mr. Segun Ajayi-Kadir, stated: “The poor power supply from the grid fueled self-energy generation among manufacturers as expenditure on alternative energy source soared to N67.77 billion in the first half of 2022 (year-on-year) up from N32.18 billion recorded in the first half of 2021, and N45.04 billion of the second half respectively.

“Although, average daily supply to the sector increased marginally to 12 hours in the first half 2022 from 11 hours in the second half of 2021, the average number of outage per day increased six times from three times recorded in the preceding half, which more than off-set the increase in supply in the period.”

Ajayi-Kadir further noted that the harsh operating environment pushed manufacturing output growth down from 5.8 percent recorded in the first quarter (Q1’22) to 3.0 percent in the second quarter of the year (Q2’22).


On the way out of the quandary, among others, MAN recommended that the government should “carry out further investment in the electricity value chain and commit to adding 10,000MW to the current electricity distributed in the country; embrace and support significant development of energy mix”, noting that the country has huge potentials for solar and wind.

The Association also called for the resuscitation of the existing national refineries to produce fuels locally. “Review the gas price for domestic consumption to be in tandem with the export price which is about $3.25 per cubic meter.

“Improve the level of forex allocation to the productive sector including manufacturing,” MAN added. 

Cost of funds

On cost of funds to manufacturers, MAN noted that average lending rate in the period under review rose by 4.5 percentage points to 23.5 percent in H1’22 up from 19 percent in H1’21.

“Average lending rate to the sector from the commercial banks increased to 23.5 percent (year-on-year) up from 19 percent of the corresponding half in 2021, but declined by 0.5 percentage point when compared with 24 percent interest charged to manufacturers in the second half of 2021. 

“The growing lending rate in the economy is underscored by among others the upwards review of the Monetary Policy Rate (MPR) from 11.5 percent to 13 percent by the CBN in May 2022 even though the asymmetric corridor at +100/-700 around MRP; Credit Reserve Ratio (CRR) at 27.5 percent and Liquidity Ratio at 30 percent remained unchanged; and the rising global interest rate due to the Russian-Ukrainian face-off,” MAN stated in the report.

The manufacturers also lamented that the “sector is generally faced with limited investment in domestic production of raw materials for utilization in most of the sub-sectors, which is as result of limited funding and policy incentives in the country”.