Rising energy prices are disturbing productive activity in Africa’s most populous country, as manufacturers self-generate more than 14,000 megawatts of electricity owing to insufficient supplies from power distribution companies.
According to records obtained from the Manufacturers Association of Nigeria on Tuesday, member firms spent N639 billion on alternative energy sources between 2014 and 2021. Manufacturers spent N25bn in 2014, N59bn in 2015, and N129.95bn in 2016.
Furthermore, 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 figures have varied over the years due to the 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, of Manufacturers Power Development Company of the Manufacturers Association of Nigeria, Ibrahim Usman.
“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 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 of 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.
The Russian invasion of Ukraine in February of 2022 has seen diesel prices triple, 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 manufacture companies that are already battered with multiple taxes, poor access to foreign exchange and now over 200 per cent increase in the 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 encouraged the Federal Government to enable manufacturers and independent petroleum product marketing organizations to import diesel from the Republic of Niger and Chad by promptly establishing border checkpoints along that axis to compensate for the supply gap caused by the product’s high cost.
The foreign exchange crisis, along with high energy prices, posed a danger to Nigeria’s industrial sector, which accounts for only 8% of the country’s GDP. A dollar is worth more than N700 in the parallel market and more than N430 in the official market. Due to the FX crisis, more than 50 firms have left the Nigerian market, and more are being choked by various levies 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. Unfortunately, we are unable to turn this situation to our benefit due to oil theft and bad leadership,” he added.
