• Tuesday, June 18, 2024
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Nigeria loses N3trn from poor power supply – Adesina

FG to sanction DisCos performing below stipulated standards

John Amusan, a barber in Ayangburen market in Ikorodu struggled to operate his business due to poor power supply and increased fuel costs. However, his fortunes changed dramatically when he installed rooftop solar panels. Within two weeks, his customer base increased by 50% and his earnings soared.

While Amusan is one of over 90 million Nigerians who lack access to electricity, his success stories demonstrate the transformative impact of electricity on businesses. It has been estimated by the IMF that Nigeria loses $29 billion, 5.8% of its annual GDP, due to a lack of energy and unreliable power supplies. Also, Nigerians spend $14 billion per year on generators and fuel.

The lack of electricity is killing Nigerian industries, said Adesina Akinwumi Adesina, President, Africa Development Bank Group. “You succeed not because of ease of doing business, but by surmounting several constraints that limit industrial manufacturing. In short, it is not the ease of doing business; it is the pain of doing business.”

The AfDB president, during his speech themed ‘The Day the Lion Roared: Making Nigeria a Global Industrial and Economic Giant’ said “To be a manufacturer in Nigeria is not an easy venture. In short, it is not the ease of doing business; it is the pain of doing business. Recent surveys by the Manufacturers Association of Nigeria indicate that industries spent N93.1 billion on alternative energy in 2018 and that they lose N10 trillion due to power failure.

“What would have happened if the industries realised N10 trillion and paid taxes? At a conservative corporate tax rate of 30 percent, that means the Nigerian government loses N3 trillion annually in taxes that it could have earned from industries if it simply provided them with electricity” he continued. “To put this in revenue perspective, the annual total revenue of the government of Nigeria last year was N10 trillion. So, the industrial sector loses the same revenue as the nation collects in one year. What an irony!”

Nigeria’s manufacturing sector faces multiple challenges, not just electricity.

One significant problem is the unpredictable availability of foreign exchange, which has led to a sharp decline in foreign direct investment. In 2022, Nigeria experienced the largest decline in foreign direct investment on the continent, dropping from $3.3 billion in 2021 to a negative $187 million, as reported in the World Investment Report (2023).

However, to boost the manufacturing sector in Africa’s largest economy, Adesina said “With the right policies, investment frameworks, infrastructure, logistics and financing framework, and powered by a highly trained, dynamic, and youthful workforce, I am confident that Nigeria will fully unleash the power of its manufacturing potential.”

“To fix this problem, I recommend that Nigeria establishes Skills Enhancement Zones––new zones in partnership with industries, dedicated exclusively to skilling up Nigeria’s workforce,” he continued. “Students can be supported to be exposed to skills delivered by different industries. This will build up their vertical skills in such industries and horizontally across different industries. This will reduce the labour market skills mismatch that several industries face and allow feedback by private sector industries into the curriculum of universities and colleges. It will unleash a new wave of wealth for Nigeria.”