From manufacturing firms to small service companies, businesses are abandoning the national grid to provide their own power, following abysmal levels of power supply and the rising cost of diesel, BusinessDay gathered from conversations with energy companies.
Businesses are signing contracts with embedded power companies, and smaller ones are turning to off-grid companies to augment supply from the creaking grid as diesel gradually morphs into black gold.
“The demand for our services has never been this high,” said Chuks Nwani, CEO of Kessington Energy Limited, an energy solutions provider based in Lagos.
Nwani said his company had had to sign about 10 power supply contracts with different businesses within the last three months and was still taking orders and answering inquiries from prospective customers.
Multinational specialist in energy distribution Clarke Energy has seen a surge by over 60 percent in demand for new gas plants by manufacturing firms, which now see the prospect of long-term savings from switching to gas.
Nathan Odumosu, the company’s marketing manager, told BusinessDay that “demand for gas plants is now at an all-time high with businesses searching out our companies and requesting talks.”
Businesses that rely on diesel plants in the face of erratic supply from the grid have been forced to face the familiar reality of poor power supply as diesel prices surged from N300 per litre in January to over N800 per litre in major cities across Nigeria.
The situation could yet get worse. Oil marketers are warning that the price of diesel could rise above N1,000 per litre in a matter of weeks if nothing is done to curtail the current challenge faced by importers of the product.
Speaking to newsmen in Abuja, Bennett Korie, national president of the Natural Oil and Gas Suppliers Association of Nigeria, said that about 75 percent of filling stations across the country are currently out of business due to their inability to purchase the diesel required to power their tankers and transport Premium Motor Spirit (PMS), popularly called petrol, to their various outlets.
He said that the only solution to the current challenge is for the Federal Government to raise the pump price of petrol a little in order to reduce the huge foreign exchange used in PMS imports.
Smaller businesses though are making the switch to petrol generators, decommissioning their diesel generators on account of diesel prices.
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A BusinessDay survey across major generator markets in Lagos revealed a surge in the demand for higher-capacity petrol generators within the last two months when diesel prices went through the roof.
Businesses from hotels to fast food outlets, even petrol stations, that need constant electricity are switching from diesel-powered generators to cut costs as they see no immediate solution to the soaring cost of diesel and poor grid supply.
“It is not like as if there has never been a demand for petrol generators, but ever since the high cost of diesel, it has increased by over 70 percent more than usual in my store, especially for those within the range 6 kilovolt-amperes (kVA)-10kVA,” Obijindu Chukwuma, the owner at Chus Best Electronic Worldwide Limited, said.
Similarly, Bonachristus Izuchukwu, who runs Bonachristub International Limited, said there is a surge in demand for petrol generators, especially from hotels and filling stations.
“It went up by more than 100 percent in one month.”
Half of the respondents to BusinessDay’s survey reported over a 100 percent increase in demand for petrol generators.
Diesel prices are deregulated in Nigeria and diesel stocks were already tight globally when Russia invaded Ukraine and the West responded with sanctions that, though not targeting its energy industry, had a crippling effect all the same.
Commodity traders were shunning Russian diesel because of the sanctions as well as payment headaches and transportation challenges as many European ports have banned Russian vessels from docking. These actions have a ripple effect across the world and have affected Nigeria too.
Meanwhile, the Federal Government and 1o state governors are planning to produce 2,000 megawatts (MW) of off-grid electricity through solar power, according to Aliyu Abubakar, minister of power.
The minister, speaking at the Power Dialogue in Abuja on Wednesday, said Nigeria’s major hydropower plants, Kainji and Jebba, were currently producing only 130MW of electricity to the grid, compared to their joint capacity of about 1,300MW.
“The policy we have for the off-grid and the mini-grid is in discussion with 14 investors, which are going to give us 1,000MW of solar,” he said. “We have reached financial and technical level with them during the evaluation. 10 state governors are also planning to produce 1,000MW for 10 states, which is 100MW each.”
According to him, the ministry is looking at other newer technologies, such as hydrogen technology, which it is still studying and collaborating with those initiating it.
“We are working closely with the hydrogen office set by the German government in Nigeria,” the minister said.
