…Russia-Ukraine war a big disruption
Rising energy costs are disrupting productive activities in Africa’s most populous nation as factories self-generate more than 14,000 megawatts of electricity due to poor supply from power distribution companies.
According to documents compiled by The Punch from the Manufacturers Association of Nigeria on Tuesday, member companies spent N639 billion in alternative energy sources between 2014 and 2021.
Manufacturers spent N25bn in 2014, N59bn in 2015 and N129.95bn in 2016.
Moreover, they spent N117.38 billion in 2017; N93.11 billion in 2018; N61.38 billion in 2019; N81.91 billion in 2020, and N71.22 billion in 2021.
The Punch found that the figures have varied over the years due to effects of inflation and the number of member companies in the association, among other factors.
“This is why we are talking about renewable energy today, especially solar, in addition to the regular gas and diesel-operated facilities,” Chairman, Manufacturers Power Development Company of the Manufacturers Association of Nigeria, Ibrahim Usman, told The Punch in a telephone interview.
“We have not utilised our natural endowments. In Morocco, Saudi Arabia, Algeria and several other countries, there are solar farms. We have sunlight in Nigeria and we need to start utilising it,” he further said.
In 2016, MAN set up a power development company to reduce high energy costs borne by factories across the country.
In 2014, a Professor of Economics, Adeola Adenikinju, carried out a survey in 2014 to determine how much self-generation capacity there was in the manufacturing sector.
The research, funded by the European Union and German government, found that manufacturers’ self-generation capacity was 13,223MW as at 2013.
Usman said the self-generation capacity had exceeded 13,000 MW since then, with others saying it was between 14,000MW and 20,000MW.
Self-generation capacity means the quantity of power generated by manufacturers through diesel, gas, low-pour fuel oil and other forms of energy.
The Russia invasion of Ukraine in February of 2022 has seen diesel prices tripled, sending several firms into temporary closures.
Many manufacturers in Africa’s most populous nation do not rely on power distribution companies as any interruption in their energy supplies can lead to shutdowns.
“Should manufacturing companies that are already battered with multiple taxes, poor access to foreign exchange and now over 200 per cent increase in price of diesel be advised to shut down operations? Should we fold our arms and allow the economy to slip into the valley of recession again?” Director-General of MAN, Segun Ajayi-Kadir, asked in a July statement sent to The Punch.
He said “as a matter of priority,” the government must “develop a National Response and Sustainability Strategy to address challenges emanating from the ongoing invasion of Ukraine by Russia,”
He urged the Federal Government to allow manufacturers and independent petroleum products marketing companies to import diesel from the Republic of Niger and Chad by immediately opening up border posts in that axis in order to cushion the effect of the supply gap driven by the high cost of the product.
Foreign exchange crisis has combined with high energy costs to threaten Nigeria’s manufacturing sector which contributes merely eight per cent to the Gross Domestic Product.
A dollar exchanges at over N700 at the parallel market and more than N430 at the official window. More than 50 manufacturers have exited the Nigerian market due to forex crisis, The Punch’s earlier report said, and many are asphyxiated by multiple taxes and over- regulation by government agencies.
“Given the current situation, manufacturers should embrace the energy mix. Renewable energy can be used by the service industry because the cost of maintenance is low,” Professor of Energy Economics at Nnamdi Azikiwe University, Awka, Uche Nwogwugwu, told The Punch in a telephone interview.
“We are encouraging technologies to evolve that will enable heavy industries to use renewable energy. It is unfortunate we are unable to turn this situation to our benefit die to oil theft and bad leadership,” he added.