Poor power supply is hurting Nigerian manufacturers, raising their production costs and reducing their competitive advantage.
The 2019 annual report of the Manufacturers Association of Nigeria (MAN) states that in 2019, manufacturers spent over N67. 38 billion on self-generated electricity with energy cost accounting for 38 percent of production cost.
According to the report, “Inadequate electricity supply and incessant increases in tariff without commensurate improvement in generation, transmission, and distribution still remain key challenges of the sector.”
A look at the financials of some quoted manufacturing companies affirmed that claim, showing that these companies pay heavily for electricity used. In 2019, Lafarge Africa Plc, one of the largest cement makers in the country, spent N42.7 million on fuel alone, Fidson pharmaceuticals spent N66.4 million, while GlaxoSmithKline Nigeria Plc (GSK) spent N70 million.
Experts say that the high energy cost of these companies increased their cost of production, forcing them to produce at higher cost. The economy hinders them from passing on the cost to cash strapped consumers,
in addition, epileptic power supply is majorly responsible for low productivity in the sector and reduces the chances of locally produced products in a competitive market. Many manufacturers are forced to compromise quality for quantity in order to adjust to the energy cost.
Funmilayo Bakare Okeowo, chief executive officer (CEO), FAE Limited, said in a phone interview, that “For we manufacturers, electricity is paramount and we incur huge cost when we have to generate it ourselves.
“We need better power supply to reduce our cost of production and the issue of tariffs should be properly addressed. We also need policies to create an enabling and competitive environment,” she further said.
Similarly, Mansur Ahmed, president, of MAN, told BusinessDay at the 5th Nigeria Manufacturing and Equipment (NME) Expo earlier in the year that energy was the single most important constraint to productivity and competitiveness of the sector in Nigeria as the impact was felt across micro, small, and medium as well as large manufacturers
