Electricity supply from power distribution companies (DisCos) worsened across the country in 2016 as manufacturers spent N129.95 billion on alternative energy sources within the year as against N58.82 billion recorded in 2015.
The 2016 figure represents 121 percent jump from that of 2015, data exclusively obtained from the Manufacturers Association of Nigeria (MAN) show.
About 30 to 40 percent of manufacturers’ expenditure is spent on alternative energy sources such as fuel, diesel, gas, low-pour fuel oil, coal and inverters as they grapple with incessant power disruptions which cripple production activities.
Manufacturers expended N62.96 billion on alternative energy in the second half (H2) of 2016 as against N66.99 billion expended in the first half (H1).
“In the period under review, due to the poor performance of electricity supply, manufacturers’ expenditure on alternative energy sources increased to N66.99 billion from N29.48 billion expended in the corresponding period of 2015, thus indicating N37.51 billion increases over the period,” says MAN.
“It also increased by N4.03 billion when compared with N62.96 billion recorded in the preceding half. Expenditure on alternative energy sourcing in the sector increased to N129.95 in 2016 from N58.82 billion recorded in 2015, thereby indicating N71.13 billion increase over the period,” adds MAN.
MAN says arbitrary escalations in Nigerian Electricity Regulatory Commission (NERC) tariff order were responsible for high energy cost in 2016, with electricity share of the total expenditure standing at 36 percent.
“The almost geometric increase in the expenditure on alternative energy source coupled with the constantly upward review of the Multi Year Tariff Orders (MYTO) by the Nigerian Electricity Regulatory Commission (NERC) accounted for high prices of home-manufactured goods and their poor competitiveness in the period,” MAN says.
“This trend also explains why the prices of made-in- Nigeria products are less competitive when compared with imported goods,” MAN adds.
MAN says that electricity supply from the DisCos in H2 of 2016 across all sectoral groups and industrial zones remained at seven hours daily as was the case with the preceding half. However, it declined by an hour when compared with eight hours daily supply in the corresponding period in 2015.
The report states that the constant power outage of electricity supply from the DisCos in H2 of 2016 was attributed to obsolete transmission and distribution equipment employed in the system.
In 2016, Nigerian manufacturers were hard hit by high energy cost and scarcity of alternatives such as gas. The price of fuel rose to N145 per litre in 2016 from less than N100. Gas was scarce within the year, pushing multinationals and large enterprises into the use of coal and low-pour fuel oil, which is expensive.
“We cannot find gas to do our production,” Micheal Ola Adebayo, chairman of MAN Gas Users Group, told BusinessDay, in the heat of gas crisis in August 2016.
“We buy at about $8 per standard cubic metres, whereas it is sold at less than $3 in the international market. We need a lower price, because we are facing a lot of challenges, especially as it concerns the foreign exchange to import inputs,” said Adebayo, who called for modification of the Gas Subsidy Law of 2008 with a view to reclassifying gas supply to manufacturers from commercial to industrial.
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