• Monday, April 22, 2024
businessday logo


Top firms battle rising costs as energy bill hits N221bn

Top listed companies in Nigeria are facing increased overhead costs as their combined energy bill hit N221 billion in the first half of 2023.
The high energy costs are being driven by a number of factors, including the rising cost of diesel and the depreciation of the naira. This has put a strain on the bottom line of companies, which now have to pass on the higher costs to consumers.
The top listed firms are Dangote Cement, BUA Cement, Dangote Sugar, Transnational Corporation, Lafarge Cement, BUA Foods Plc, Fidelity Bank, and Wema Bank.
Data obtained by BusinessDay from their financial statements showed that the eight firms recorded an 18.35 percent increase in energy costs to N221.75 billion in the first half of 2023 from N187.36 billion in the same period last year.
Leading the pack with the highest energy costs reported in the first half of 2022 are the cement makers, with Dangote Cement spending N157.020 billion on fuel and power, a 20.82 percent growth from 2022.
“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,” Israel Odubola, a Lagos-based research analyst, said.
“In some countries, power takes only about 10 percent of their production cost. In Nigeria, power, sometimes, takes up to 50 percent of our production cost,” he added.
Further findings showed BUA Cement spent N47.91 billion on energy in the first half of 2023, an increase of 9.92 percent from N43.58 billion reported in 2022, while Dangote Sugar recorded N42 million compared to N29 million recorded in the same period of 2022.
BUA Foods Plc’s diesel and fuel costs accounted for N216 million in the first half of 2023 from N122 million recorded in the same period of 2022.
Fidelity Bank posted N366 million as its electricity cost in the first half of 2023 from N271 billion recorded in the same period of 2022, while Wema Bank recorded N829 million as its diesel expenses in the first half of 2023 from N685 million recorded in the same period of 2022.
BusinessDay findings showed rising energy costs disrupt productive activities in Africa’s most populous country as factories self-generate more than 14,000 megawatts of electricity due to poor supply from electricity distribution companies.
Data sourced from the World Bank’s Power Sector Recovery Programme said inadequate power supply costs businesses in Nigeria about $29 billion yearly.
It also observed that Nigeria had the largest number of people without access to electricity worldwide, as one in 10 people without access to electricity currently resides in Nigeria.
According to documents compiled by BusinessDay from the Manufacturers Association of Nigeria, member companies spent N639 billion on alternative energy sources between 2014 and 2021.
A survey by BusinessDay showed many manufacturers are no longer relying on electricity distribution companies, popularly known as DisCos, for electricity supply in their production units or factories.
They have switched to gas or low-pour fuel oil to avoid suffering losses arising from a power outage during production activities.
Findings showed some companies that have abandoned the Discos include Flour Mills of Nigeria, Dangote Group, Cadbury, Haffar, Kam Industries, and Qualitec Industries, among others.
It was gathered that some manufacturers only use public electricity supply in offices but utilise alternative power sources in the production lines.
It was also reported that some SMEs spend up to N3,000 per day on diesel, according to the Manufacturers Association of Nigeria. The price of diesel has more than doubled from around N300 a litre to over N600 per litre in one year. The Russian invasion of Ukraine has skyrocketed gas prices, forcing up production costs.