By Babatunde Ayedoju
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The Chairman of Board of Directors, Manufacturing Association of Nigeria’s Power Development Company, Ibrahim Usman, disclosed that electricity takes between 40 and 50 percent of the production costs.
According to him this is a development that has affected and still poses a threat to the quality, quantity and performance of Nigerian goods, compared to goods from other African countries.
This disclosure is in line with a report submitted to the National Electricity Regulatory Commission (NERC) in 2015 by a member of Manufacturing Association of Nigeria (MAN) and Chairman, Technical Committee on Operationalisation of Micro-Grid for Industrial Initiative, Regard Odiah.
Odiah stated that over 40 per cent of production cost in Nigeria goes to electricity generation by manufacturers. The combined power generation capacity of MAN nationwide was 15,000 mw, while the maximum generation from the central/national grid was less than 5,000 mw and unreliable.
In this interview with BABATUNDE AYEDOJU, Professor Bayo Fatukasi of the Department of Economics, Adekunle Ajasin University, Akungba-Akoko, speaks on the impacts of electricity on production cost and productivity in Nigeria, and how to overcome the challenges. Excerpts:
Manufacturers spend up to 40 percent of production cost on electricity. How does this affect the quantity and quality of local production in Nigeria and the performance of Nigerian goods at the African Continental Free Trade Area?
About 40 – 45 percent of the production cost of manufacturers in Nigeria is spent on electricity. This makes indigenous goods un-competitive within and beyond Africa, especially within the African Continental Free Trade Area. High cost of electricity leads to high cost of production. For our goods to be competitive, we must get our price right and cost of production must come down. This cannot be right when electricity cost for the manufacturing sector in other competing countries does not go beyond 10 percent, whereas in Nigeria it is about 40 – 45 percent.
What are the other factors that may be affecting the manufacturing sector in Nigeria?
Basically, factors of production such as land, labour, capital and entrepreneurship are considered to be the inputs used in the production of goods and services, in order to make economic profits. Besides, the manufacturing process is a complex one and can be also be affected by other factors such as policy of management, safety of employees, factory overhead and special parts.
Are there alternative sources of power for the manufacturing sector? If yes, what are they?
Manufacturers spent N245 billion on alternative energy sources such as gas, low-power fuel, diesel and petrol between 2017 and 2021 Manufacturers have lost hope in Discos and many are now running on gas and diesel on a regular basis, in order to avoid suffering losses arising from power cuts during production. There are other sources like gas, fuel, black oil, diesel and solar, but these will make the prices of products to go up.
There is a report that the price of diesel may be increased to N1500. Don’t you think it’s better for the government to improve power supply, so that we will no longer need to depend on diesel?
Yes, government needs to improve power supply, and besides alternative sources should be sought. As it is now, we have almost all it needs to make our power supply work; all that matters is political will.
In view of all these, what does the future hold for the manufacturing sector in Nigeria?
With our population of over 200 million or thereabouts, a large market can be found for manufactured goods. The issue of electricity must be fixed, possibly exploit other sources of energy generation. Nigeria is lucky in the area of population distribution. It has a favourable demography with 43 percent being young people, meaning that the manpower and human resources required to support a robust and rapidly growing manufacturing sector are already available. Herein, what we need doing is to give them the necessary skills through adequate training. Nigeria equally has highly rated financial institutions. Favourable lending terms and interest rates must be encouraged.
The business environment should be made friendly by our government. Currently, manufacturers are left to fend for themselves on many issues (provision of electricity, water, good roads etc, overvalued naira currency, weak regulations pertaining to the import of substandard products and poor infrastructure development) and in the provision of social amenities that should be easily provided by government.
The issue of multiple taxation should be looked into as well. I think if all these problems are solved, the manufacturing sector can serve as a massive employer of labour. Nigeria’s teeming youths, both skilled and unskilled, will be engaged and able to eke out a living. The restiveness which has already reared its head across many areas of Nigeria in the form of militant groups such as Boko Haram, the Indigenous People of Biafra and Niger Delta Avengers can be curtailed.
