Nigeria's leading finance and market intelligence news report.

Manufacturers’ energy spend drops by N24bn amid gas tussle

Manufacturing Sector

Manufacturers spent N24.28 billion less on alternative energy sources in 2018, according to the Manufacturers Association of Nigeria (MAN).

Expenditure on alternative energy sources fell from N117.38 billion in 2017  to N93.1 billion in 2018, MAN’s economic review says.

“Paucity and high electricity tariff have posed dismal challenges for Nigeria’s manufacturing sector over the years,” MAN says.  “However, electricity supply appears to have slightly improved in the second half of 2018 at it stood at 10 hours per day as against nine hours per day recorded since the second half of 2017,” MAN explains.

 It adds that average number of power outage in the second half of 2018 stabilised at between three to four times per day since the first half of 2017.

Energy occupies 40 percent of manufacturing expenditure, according to players in the sector.

Many multinationals no longer rely on power distribution companies as they see the DisCos as unreliable.

Nigerian manufacturers say they are unhappy that franchisers of natural gas are dollarising payment of the energy source and selling to them at $$7.45 per standard cubic meter (scm), which is above the international price.

They say the situation is compounding their energy woes and raises production costs while lowering their competitive capacity.

“The persistent increase in the price of natural gas used by our members to power their plants and machineries has reached a crisis dimension,” Mansur Ahmed, president, Manufacturers Association Of Nigeria (MAN), said at an interactive forum on gas pricing in Lagos on April 30.

“Similarly, the continued denomination of price of gas in US dollars has made the product perpetually exorbitant and gradually getting outside the reach of majority of the manufacturers, particularly the small and medium industries,” he said.

The federal government had on January 4 this year gazetted a gas pricing framework for textile industries with a view to cutting down price for key players in the sub-sector. Many manufacturers are, however, unhappy that this was not extended to all players in the sector to reduce the huge impact which energy costs make on their margins.

 “It is also instructive that while the average price of gas globally has been ranging in between and around $2.5 per scm. The case in Nigeria, where it is $7.45 per scm, is worrisome and with this kind of differential, Nigeria manufacturers cannot and may never be competitive,” Michael Adebayo, chairman, Gas Users Group of MAN, said.

Already, the Manufacturers Association of Nigeria, through its MAN Power Development Company, has signed an agreement with Tower Energy Solution & Systems Limited for the supply of six to 10 megawatts (MW) of electricity to Henry Carr Industrial Cluster in Ikeja, Lagos.

MAN has an agreement with Negris Group for the supply of up to 80 MW of electricity to Odogunyan in Ikorodu industrial cluster.

The organisation is also talking with solar power supply firms in the northern Nigeria, where there is limited gas supply, to enable clusters in Kaduna, Kano and other parts of the north to have incremental power at cheaper rates. Similarly, a negotiation is on the pipeline with Sahara Energy, Geogrid LighTec Limited and other companies for the supply of power to industrial clusters, according to Ibrahim Usman, chairman of MAN Power Development Company Limited.

“The idea is to be able to put manufacturers together in clusters and arrange for  power, which can be supplied through providers that will engage in power supply through hydro, solar, gas and  will remove  the cost of manufacturers  getting  involved in producing their own power, “ said Reginald Odia, chairman of Economic Policy Committee of MAN and director of the MAN Power Development Company.



Leave A Reply

Your email address will not be published.