Financial Energy Review
Manufacturers decry the soaring cost of production which has reached all time high of 45 percent majorly occasioned by their spending on power generation.
According to the manufacturers they have spent N425 billion on alternative energy sources such as gas, low-pour fuel oil, diesel, and petrol between 2017 and 2021. This is coming from the energy expenditure of members of the Manufacturers Association of Nigeria, (MAN) within the period.
This does not include manufacturers’ expenditure on power coming from electricity distribution companies, popularly known as DisCos.
According to the data, expenditure on alternative energy sources by MAN members amounted to N117.38 billion in 2017; N93.11 billion in 2018; N61.38 billion in 2019; N81.91 billion in 2020, and N71.22 billion in 2021.
In reality, expenditure on power fell by 39 per cent between 2017 and 2021, but power remains a major challenge facing manufacturers as 40 per cent of their expenditure goes into sourcing of energy for production activities.
The PUNCH gathered that many manufacturers are no more relying on the electricity distribution companies, popularly known as DisCos, in their production units or factories, but have deployed gas or LPFO on regular basis in order to avoid suffering losses arising from power cuts during production activities.
Based on our findings, some of the companies that have jilted DisCos in their factories include: Flour Mills of Nigeria, Dangote Group, Cadbury, Haffar, Kam Industries, Qualitec Industries, among others.
It was gathered that some manufacturers only make use of DisCos in offices but use alternative power sources in the production department.
The Chairman of the Power Sector of the Manufacturers Association of Nigeria, Engr Ibrahim Usman, confirmed that some manufacturers who could afford alternative energy sources were fully deploying them, but noted that those who could not afford such still relied partly on DisCos for electricity supply.
“Energy is not so easy. Manufacturers who can afford gas at their own facilities are using it to power their production activities. This is especially common among those who are in the Lagos region. But in other areas where you do not find gas, people are using other energy sources and some still use DisCos,” he said.
Chairman of MAN Gas Group, Dr Michael Ola Adebayo, noted that power was a major problem for manufacturers, noting that his own company, Haffar Industries, where he is a director, uses gas, black oil, and diesel to power its production.
“Energy is a major issue in the manufacturing sector. By the time you spend money on gas, black oil, diesel and other energy sources your production cost will be so high,” he said.
Manufacturers self-generate about 13,223 megawatts of electricity, according to data by MAN. Some SMEs say they spend N100-3000 per day on diesel. Price of diesel has almost doubled from around N300 a litre to over N600 per litre in one year. The Russia invasion of Ukraine has skyrocketed gas prices, forcing up production costs.
A Professor of Ceramics Engineering, who understands energy economics, Patrick Oaikhinan said Nigeria would hardly become a manufacturing hub or industrialised without power.
“In ceramics, we use heat to process solid minerals. Without power,, you can’t meet your capacity, and the country can’s achieve industrialization,” he said.
He noted that several small-scale manufacturers were struggling to cope and shutting down due to high energy costs in the country, stressing the need for manufacturers to explore renewable energy.
Managing Director of Zubnol Global Link Industries, Chukwubuike Nnoli, noted that big machines required steady power and things could go awry if there were power failures.
He stressed the need for the country to have steady power supply at industrial clusters in order to power industries.
He explained that power expenditure of SMEs were becoming very high.
