It is no news that power production – generation, transmission and distribution – is worsening in Nigeria going by the series of thorny issues that bedevil the entire nation’s energy value chain.
From policy somersault, ineffective and archaic energy law, inadequate funding to corruption and misappropriation of resources, it’s been a tale of woes in the energy sector for investors, residents, businesses and even government’s agencies. Despite installed energy capacities of 11,165.4 megawatts from 23 hydro and gas-fired plants spread across the nation, the African Country with highest gross domestic product of $441.5 billion can’t boast of stable of 5,000 megawatts of electricity for one month uninterrupted as the Nigeria’s national grid has collapsed seven times between January and September, 2022.
This has left residents, especially investors and business owners with no other option except to energise their homes, businesses and factories with off-grid power system with very exorbitant costs which account for cost-push inflation as increasing cost of energy puts more pressure on consumer goods and disposable income.
Telecoms, manufacturing, financial and other service-based firms spend billions of dollars on an annual basis generate power at the expense of consumers, just as the government – federal, state and local, charge high and multiple taxes even with the inefficiency in the nation’s energy sector.
Many multinational and indigenous companies have paid trillions of Naira in taxes and levies with little or nothing achieved over time. MTN Nigeria is an example of such multinationals that have paid taxes and levies in trillions of Naira since its inception in Nigeria in 2001.
MTN Nigeria alone has paid N3.5 trillion in taxes and levies, which is more than one-thirds of N8.37 trillion used to construct the Dangote Refinery or the N2.3 trillion Federal Government votes on the Lagos-Ibadan Expressway, Abuja-Kaduna-Zaria-Kano Road, Second Niger Bridge and Mambilla Hydropower Project or the entire equity of Nigeria Soverign Investment Authority which stood at N1.128 trillion as of December, 2021.
Even with huge costs of taxation and levies by the Nigeria’s Government, individuals, business owners and investors still spend billions of Naira to power their factories and businesses on a daily business.
Records of energy expenses from MTN Nigeria show that the multinational telecoms company, which contributes 6 percent to the entire Nigeria’s GDP, spends over N10 billion monthly to power over 20,000 base transmission stations alone and several billions of Naira to power its Cable Landing Stations (CLS), MTN Headquarters and over 860 Corporate Branches and Offices across Nigeria.
The worsening case of Nigeria’s energy sector prompted the Manufacturers Association of Nigeria (MAN) to declare that power accounts for over 40 percent of their production cost which is unbearable – a plunge in the capacity utilisation of manufacturers.
“Unfortunately, the manufacturers who largely rely on diesel to run their factories, due to unreliable grid power supply, are contending with huge cost to sustain their production line. The information from MAN members equally indicates that the production capacity utilisation has been going down because of the unsustainable cost for running daily production on diesel.
“The direct implication of this trend, as many Nigerians are already feeling the heat, is the reflective high cost of goods in the market owing to the high cost of production”, Segun Ajayi-Kadir, Director-General of MAN, said at a recent media engagement.
Corroborating the position of Segun Ajayi-Kadir on the increasing expenses incurred by the manufacturers on alternative energy sources, especially diesel and gas, the recent statistics of energy used within the first half of this year showed an increase of 50.6 percent when compared the same period last year as manufacturers spent N67.7 billion on the alternative energy sources between January and June, 2022.
The above excerpts from the body of investors and captains of industry testifies to worsening energy situation and cost-push inflation in the Country, for which internet data bundles from major telecoms service providers such as MTN, Airtel, Globacom, 9Mobile, among others, would be increased any moment from now based on increasing cost of production, mainly from energy.
Unlike in South Africa, MTN, Vodacom, among other telecoms companies and manufacturers, get power from Electricity Supply Commission (Eskom), a South African electricity public utility which generates 58,753 megawatts of energy from different sources such as coal, wind, solar PV and CSP, nuclear, hydro, landfill gas, biomass and OCGT. The country not only feeds all its residences and establishments, but also sells power to neighbouring Countries such as Mozambique, Lesotho, Botswana, Namibia, Zambia, Zimbabwe, Eswatini and other Southern African Development Community Countries.
Although, South Africa demands more energy due to more industrialization and population which accounts for power shedding across the South African provinces, cost effectiveness and quality energy service as being provided by the Electricity Supply Commission (Eksom), South Africa are far better than what is obtainable in Nigeria, thereby, making goods and services far more competitive and quality-based than that of Nigeria.
Speaking with 20 Fellows of the MTN Media Innovation Programme (MTN MIP I) during a study tour to Johannesburg, South Africa, Chika Ekeji, group chief strategy and transformation officer at MTN Headquarters in South Africa, declared that the cost of production and entire expenses incurred by investors to offer quality goods and services in Countries like Nigeria is too much considering the poor infrastructure.
Even with huge costs of taxation and levies by the Nigeria’s Government, individuals, business owners and investors still spend billions of Naira to power their factories and businesses on a daily business
“Nigeria is off-grid power, it means that every MTN tower and station or any other telecoms tower and station, has a generator to power them. Unlike in South Africa and other Countries that run grid power system, in those Countries, we don’t need to buy generators, power is being supplied by government from public power infrastructure.
“Until recently we used to get power directly from South African Government, but there are challenges as regards power supplies to our stations and towers, we are devising power solutions in South Africa and across Africa. What we have seen is that Countries, like South Africa, with better infrastructure such as optic fibres, energy and other critical infrastructure have better economic growth and development and we must tell our Government in Nigeria is that high quality of infrastructure will bring about cost-effectiveness and competitiveness, it’s the way to go,” he said.
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A visit to Tri-Generation Carbon Credit Plant in Fairland, Roodepoort, Guateng in South Africa, which is the first Carbon Credit Plant in Africa, shows that MTN Group does not only work to achieve energy self-sufficiency, but also looks towards drastic reduction of global greenhouse gas emissions.
The Tri-Generation Carbon Credit Plant which powers the MTN Group Headquarters and the MTN South-Africa Headquarters in Fairland, Roodepoort in South Africa, has and installed capacity of 5MW, but generates 2MW and runs on Compressed Natural Gas (CNG).
According to Wessel Schmidt, the Manager of MTN Tri-Generation Plant, by running on the eco-friendly Tri-Generation Plant to power the MTN Group Headquarters and the South Africa Headquarters of MTN alone, the telecoms firm saves 300 litres per hour of diesel at R26 per litre, amounting to R68.3 million per year, which is about $3.9 million per annum and about N3.7 billion in Nigeria.
While hosting the Fellows of MTN MIP I at the MTN Headquarters in Lagos, Nigeria, Ralph Mupita, Group Chief Executive Officer (GCEO) in company of Karl Toriola, Chief Executive Officer and Mohammed Rufai, Chief Technical Officer, MTN Nigeria, disclosed that MTN Group invests $2 billion in capital expenditure annually, mainly on broadband expansion and energy.
Mupita, who noted that MTN Group seeks 50 percent reduction of global greenhouse gas emissions by 2025, said that there would be strategic and gradual investment in energy in Nigeria and all other African Countries where MTN operates to support the the United Nations Framework Convention on Climate Change.
Also, Karl Toriola, chief executive officer, MTN Nigeria decried rising cost of production and operations as being caused by the high cost of energy cost, Customs tariffs on imported tools and machines, Right of Way (RoW), among others, saying the telecoms firm bears much more operating cost in Nigeria than any other Countries of operations.
Toriola, who stated that MTN Group is devising means to cushion the effects of global inflation shock as well as controlling the rising cost of energy in Nigeria, disclosed that if the trends continue the operators would be left with no except to reasonably answer gradually increase their tariffs.
“We have been able to continue to grow at least in Nigeria and it’s pretty much the same for all telecoms businesses, the difference between us is that we execute pretty much good enough thanks to the team at MTN. First thing is that you try and have better quality of service, better distribution and competitive products in terms of price. We are consistent in terms of value for service and we have tried to keep our pricing competitive despite covering 40 percent population.
“In Nigeria in the last past 18 – 12 moths, there has been significant increase in the prices of goods and services; the price of your bread, garri, gas, diesel and almost everything has gone up, we are only one in the last 20 years that has seen a consistent decrease in our tariffs and there is a limit this can go before it starts affecting the quality and our ability to invest in the future of this nation.
“Over time under the guidance and control of the regulatory authority which is NCC (Nigerian Communications Commission), with the policy supervision by the Honourable Minister (Communications and Digital Economy), we will continue to ask and expect that there would be gradual and reasonable uplift in prices to enable us to first absorb the inflation shock, that we have experienced across the Country, and that if power; the diesel cost.”
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