For eight months and running, a plastic bottle and cellophane bag manufacturing plant in Mowe, Ogun State, has shut down over the unbearable high cost of operation.
The medium-size factory stated that the situation was temporary, with an assurance to recall staff members in three months. Since then, time has elapsed with no sign of reopening, while staff members, who are out of job, and their families, are hard hit.
In Lagos, some bread makers no longer have their loaves on vendors’ shelves because the bakeries have shut down, also over the unbearable high cost of operation.
It is also the same sad situation across the country as many small businesses, which have been grappling with persistent macroeconomic hurdles are closing shop.
While the challenges are numerous, the worst of them all, according to many small business owners, is the high cost of sourcing alternative electricity, as the regular supply has always been epileptic.
According to Damian Nsikak, a small enterprise owner, there are many bad knocks everywhere for small businesses in Nigeria as diesel price tops the escalating costs.
Nsikak, who runs a bottle and sachet water factory in Egbeda, Lagos, decried that he has been grappling with huge overhead cost in the last one year, amid new taxes every month, harassment of his staff by local council agents, impounding of his supply trucks by the Federal Road Safety Corps, Vehicle Inspection Officers (VIO), among others.
“We can always maneuver some of these challenges but not the epileptic electricity supply. There is no short cut, every alternative source of electricity is expensive because we need big generators to run our machines, big generators gulp diesel like water and you know how expensive diesel is now,” he lamented.
But, what worries the entrepreneur most is the huge amount he pays every month as electricity bill, yet little or no supply at the end of the day.
“Before opening the factory on February 20, 2019, the Ikeja Electricity Distribution Company, advised me to get a small transformer, which I did, and I was told that I was connected to the Band A tariff plan, but I often run on generator. So, where is the 20 to 24-hour light they promised?
“If you are wondering why the price of sachet water is going out of the reach of the masses, the high operation costs, especially running diesel generators, are the reasons. The price will be going up soon,” Nsikak warned.
Cyprian Obilor, another entrepreneur, who runs a 25-room hotel, an open-garden restaurant and a laundry factory in the same premises in Wuse, Abuja, decried that the lack of stable electricity supply results in high run time for generators at the horrendous price of diesel and spare parts.
“No matter how small a hotel is, the operation cost is hugely affected by not only the increased cost of diesel, but also the extra running hours. I think the minimum any small hotel will spend a day on diesel is 1,500 litres at N1,300 per litre, if they are using a medium size diesel generator. That is N1,950,000, almost N2 million per day if they run diesel generators full day, which happens a lot.
“If you multiply that amount in a month, it will give you about N60 million, so how much profit do we make, yet the FCT taskforce will harass life out of us if we did not pay any tax or levy on time,” he noted further.
While crying for small businesses, Obilor, a member of Hotel Owners Forum Abuja (HOFA), lamented more for big and branded hotels, who he noted would need about 5,000 litres of diesel at N1,610 per litre per day, depending on the size of their operation and which amounts to N6.5 million every day on diesel alone.
Apart from the high cost of diesel, most small business owners lament that maintaining the generators at the current cost of spare parts is another matter, which also deplete their profit margin.
Adding to the travails of small businesses is the new electricity tariff, which the organised private sector is calling on the government to suspend, as firms may pay up to N1.4 billion per annum with the new tariff.
“As it stands now, many manufacturing outfits, especially SMEs are going to close shop because the 200 percent hike in electricity tariff at this difficult time is inimical to the survival of our business and would lead to unprecedented downturn in the productive sector of the economy,” decried Abel Ugbede, a member of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), an arm of the Organised Private Sector of Nigeria (OPSN).
Ugbede foresees manufacturers, whether small or big, paying more for electricity that has never been available and as usual, will be paying more to boost alternative energy sources as well as incurring huge cost that would be passed on to the customers, who are already weighed down by low purchasing power.
Speaking on the grouping of customers in different bands by the electricity companies, Ademola Fakeye, a paint manufacturer, noted that the segregation does not make sense because no matter the band, there has never been a stable power supply.
“Both Ikeja and Eko electricity companies promised customers under Band A 20 to 24-hour of electricity supply daily, those in Band B, 16 to 20 hours and those in Band C, 12 to 16 hours daily. But none of these bands enjoy up to 10 hours of steady power supply. I think it is fraud and the companies should be charged to court on failure to fulfill their part of the bargain or return the huge money customers have been paying,” he said.
Fakeye decried that his factory in Ijegun is not connected to Band A, but has no regret because those who are connected do not get power supply as promised, hence he queried the essence of the ‘premium’ band when the service is not premium.
“If I am a customer on Band A and I don’t get the promised 20 hours power supply daily, I will ask for lesser bands where I will get less supply and pay less for it. However, the government should suspend the new tariff until discos improve on power supply.
“We don’t want to hear that the gas turbine failed, the grid collapsed or whatever challenge that will impact power supply because we have paid for that length of power supply and must have it or money refunded,” he concluded.
Moreover, the pressure has continued mounting on businesses with a seeming season of hikes.
Aside from the electricity tariff, the Central Bank of Nigeria had earlier increased the interest rate from 22.75 percent to 24.75 percent, a development the private sector said would result in higher inflation, massive job cuts and low productivity, which will negatively impact the Gross Domestic Product (GDP).
Defending the hike, Yemi Cardoso, the CBN governor, insisted that it is aimed at fighting inflation, stabilizing the economy and restoring the purchasing power of the average person.
But Emeka Onochie, an Nnewi, Anambra State-based auto parts and components fabricator, noted that with the hike bank credit is no longer affordable as businesses would be under pressure to repay loans when the harsh economy does not guarantee sustainable patronage.
“Going forward, the signs are clear. Those who cannot borrow to fund their businesses should remain small or close shop because patronage is not guaranteed like before. Many Nigerians are just surviving,” Onochie, a mechanical engineer, and a member of the Nigerian Association of Smal Scale Industrialists, South-East zone, said.
Sadly, the worsening situation has seen Nigeria fall from being the largest economy in Africa, to the fourth position, with South Africa now the largest economy, followed by Egypt and Algeria, according to the International Monetary Fund (IMF) recent ranking.
