A new report by Nanyang Technology University’s Centre for African Studies reveals that Nigeria’s inadequate electricity supply adds 40% to the cost of manufactured products.
The 150-page report titled “Back to Growth: Priority Agenda for the Economic Revival of Nigeria” was presented by Amit Jain, the Director of the Centre, in Lagos. The report highlights the challenges faced by the manufacturing sector due to the poor state of electricity, emphasizing that electricity blackouts, along with transport bottlenecks, crime, and corruption, are among the key impediments to firm growth.
According to the report, electricity shortages and fluctuations lead to damage to machinery and equipment, forcing most firms to rely on self-supply through generators, thereby increasing production costs and eroding competitiveness.
The report recommends that, given the difficulty of guaranteeing uninterrupted power supply nationwide, the government should consider developing industrial clusters. Industrial clustering allows for prioritized infrastructural provision, giving firms a competitive edge while providing access to raw materials, skilled labor, technology, and materials.
The report further emphasizes that these clusters should be strategically located within well-connected zones, ensuring access to roads, power lines, and telecommunications.
While Nigeria has seen some success with informal clusters like the computer village in Lagos, the report notes that coordination challenges between federal and state governments and inconsistent implementation of industrial policy have hindered the full potential of such clusters.
In June, the Manufacturers Association of Nigeria highlighted the impact of the country’s electricity shortage on manufacturers, estimating an annual economic loss of about N10.1tn, representing about two per cent of the country’s Gross Domestic Product (GDP).
