How epileptic power supply’s killing Nigerian industries

IT seems the Federal Govern­ment is finally coming to terms with the reality in the power sec­tor now, going by President Mu­hammad Buhari’s statement at the Economic retreat last week.
He was quoted as saying that the poor power situation in the country was no longer a laughing matter.
The local manufacturers painted the scenario thus: About 70 per cent rise in cost of op­erations was recorded as power generation, which rose to above 4.500megawatts, suddenly dropped to less than 1,200mega­watts, resulting in loadshedding by the power distribution com­panies. Although generation as at Thursday last week had been restored to about 3,365mega­wats, getting electricity evenly distributed to the real sector has become a task the Discos have not found funny.
According to a report from the Manufacturers Association, of Nigeria (MAN), members companies in the past three years, spent N20.8 billion, monthly on power generation to run produc­tion process.
MAN President, Frank Jacobs, said the ripple effects of the pow­er shortages and constant outages were numerous, ranging from cut down in production, job loss to outright closure or relocation to other countries by industries. He added that companies had to bear so much loss as the outage often occurs when goods are in the middle of production.
He said: “when you are pro­ducing and power is taken unan­nounced, goods in line of produc­tion would be destroyed.”
As a result of this, Jacobs said many members of MAN have resorted to generating power privately and completely cut off their operations from the national grid.
“Most companies, like Coca cola, Wempco, Nigeria Flour Mills and especially the multi na­tionals self-generate their power. They don’t rely on the national grid. And for the last three years, our study showed that our mem­bers spent averagely in a month, N20.8 billion, he said.
Corroborating this, the Direc­tor General of the Nigeria Em­ployers Consultative Association (NECA), Mr. Segun Oshinowo, said generating alternative power to run the manufacturing sector is expensive and invariably increas­es the cost of production.
Oshinowo said as Nigerian companies operate in the global market, the consequence of in­curring high cost on power gen­eration undoubtedly would make the nation’s industries less com­petitive.
His words:”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’s really a serious problem.”
On his part, the Director Gen­eral, Lagos Chamber of Com­merce and Industry (LCCI), Mr Muda Yusuf, said members of the Chambers, be it multi nation­als or Medium, Small or Micro Entrepreneurs (MSMEs) have all resorted to alternative source of energy, ranging from gas, diesel or PMS, which he said is affect­ing their cost of operation and over all effectiveness.
“Some of the big companies have completely cut off from national grid to private gas sup­ply as means of providing power for their operation. This is be­cause some of their operations and productions cannot work with the epileptic power we are experiencing in the country. All the multinationals are generat­ing their power themselves right now.”
Yusuf said though some of the companies still manage to oper­ate on public electricity, but noted that they have to revert to diesel to power their generators any­time there is an outage, which he said is more expensive.He lamented that with the present scenario of fuel scarcity, companies expenses on alterna­tive source of power has doubled.
“Those that suffer most now are the SME and the micro op­erators that rely on generators, more so now that the fuel is not even available, their problems have been compounded”, he said.
With a remarkable increase in operational cost and poor pur­chasing power of consumers, the manufacturing companies have had to lay off thousands in the last six months, with about three million still to go.
A 2015 report of the Good Governance Initiative (GGI), a non-governmental organisa­tion advocating uninterrupted power supply in the country, says Nigerians spend N3.5 trillion on fuelling their gen­erators annually.
Its President, Mr. Festus Mbisiogu, said an intensive research conducted by the body to ascertain the nega­tive multiplier effects of un­steady power supply last year showed that the manu­facturing sector spends over N800billion yearly on genera­tors.
He added that this is apart from about N2 trillion spent on running generators by over 17 million Small and Medium Scale Enterprises (SMEs), banks, other corporate entities and traders across the country.
He explained: “In the bank­ing sector, each branch spends over N4million on diesel in a month. When you multiply that figure by the number of bank branches in Nigeria, it could be collosal. An average family man spends between 60,000 and N100, 000 in a month on fuel, apart from the maintenance.
“With over 6,133 bank branches and each expending N4million on diesel a month, N48million will go down the drain in a year, and this will amount to N294.4billion per annum across all the branches. This means that not less than N1.5 trillion must have gone into diesel purchase in the past five years. This is outside the amount spent on powering ATM points located outside banking premises and main­taining the generators, among other critical banking infra­structure”, he stated.
Financial experts say the amount spent on fuel and gen­erators by manufacturers and SMEs will increase remark­ably this year as 2016 is clear­ly the harshest since the 2008 global economic meltdown.
The rough business climate has forced many companies to close shops, while the sur­viving ones are retrenching workers daily.
Recently, the Organised La­bour raised an alarm that the food, beverage and tobacco sector of the nation was on the verge of shutting down and that over three million jobs were at risk due to the inability of companies to meet the crip­pling cost of production.
Already, leading compa­nies in the sector such as Ni­gerian Flour Mills, Nigerian Breweries, Guinness, Nige­rian Bottling Company, 7-UP Bottling Company, Friesland Campina Wamco, among oth­ers, have written to labour for discussions on planned sack of workers.
The companies listed their challenges to include acute forex shortage, poor power supply from the generation and distribution companies, scarce and costly fuel to run their generators, among oth­ers.
Daily Sun checks reveal that in the last three months, no fewer than 1,500 workers had been sacked in the food and beverage sector as em­ployers seek ways of coping with strangulating operational costs.
At a recent press confer­ence in Lagos, the leaders of Food, Beverage and Tobacco Senior Staff Association (FOBTOB) called on the Fed­eral Government to intervene and save the industry and over three million jobs that are un­der threat.
The President of FOBTOB, Quadri Olaleye, claimed that employers in the sector had devised every opportunity to sack workers, adding that be­tween the 2012 and the first half of 2015, over 3,000 work­ers were sacked in the guise of re-engineering, restructuring, right sizing, downsizing, re­dundancy and re-organisation.The National Bureau of Statistics put the total number of SMEs in the country at over 17 million, many of which rely on generators to run their businesses as the country con­tinues to grapple with abys­mal power generation.
Looking at his own sector, the Chairman of Toiletries and Cosmetics Manufactur­ers Group, Mr. Ikpong Umoh, said ‘ hopes were dashed fol­lowing the inability of the power generation companies (Gencos) and Distribution Companies (Discos) to pro­vide the power supply needs of the citizens two years af­ter the privatisation exercise. He observed that the role of manufacturing in a develop­ing country like Nigeria can­not be trivialised.
He called on the President Muhammadu Buhari led gov­ernment to urgently save the manufacturing sector from total collapse by providing constant power supply.
Also, speaking in the vein, the National President of Ni­gerian Association of Cham­bers of Commerce, Industry, Mines and Agriculture (NAC­CIMA), Chief Bassey Edem, said that despite the privatisa­tion of the power sector, there is still epileptic power supply in the country.
He lamented that the coun­try generates less than 5,000 megawatts (MW) of electric­ity for its over 170 million population.
This, Edem said, does not go anywhere in meeting the requirement of the Nigerian people. He stated that many Nigerians that are out of job today would have been em­ployed, directly or indirectly, if there is reasonable power supply, adding that manufac­turing industries would oper­ate well, expand their capaci­ties and employ more people. As a way forward, he said that government, through Discos, should constantly put checks on marketers and stop them from engaging touts.
In his view, Yusuf, the LCCI boss said industries in Nigeria are going through hard time.
“I think some thing has to done if this country is move forward. We cannot continue this way as a nation. Where on earth have you see manu­facturing running generators as major source of energy supply? Government should see to the plight of the manu­facturers in the country before all the industries relocate to Ghana as we are experiencing today,” he warned.
The President/CEO of Erisco Foods Limited, Chief Eric Umeofia told Daily Sun that the high cost of running manufacturing plants on gen­erators was one of the reasons most local industries had re­mained uncompetitive and profitable as going concerns. “Imports of substandard goods, smuggling and high cost of electricity have all combined to wreck havoc on theNigerian manufacturers,” he said.
In the aviation sector, many businesses are going through very hard times. It is estimated that the industry is incurring an additional cost of about N100 million, having to power its facilities on genera­tors. A senior airport officials who handles the operations aspects of Nigerian airports and does not want to be named said “running the vari­ous government airports on private power generators had doubled cost of maintaining the airports and also stifled re­cent attempts to earn reason­able revenue as a business.”