The accumulative cost of alternative energy replacements in the manufacturing sector stood at N77.22 billion last year against N81.91 billion recorded the previous year.
The decline in expenditure on alternative energy sources last year was ascribed to the marginal improvement in the national electricity supply over the period.
The figures were contained in the Manufacturers Association of Nigeria’s (MAN) ‘Second Half Economic Review 2021’ (July-December 2021) released at the weekend.
MAN said though electricity supply from the national grid has marginally improved since 2019 as indicated by the average daily electricity supply and outage, electricity supply from the grid has been inadequate. This, according to the association, compelled manufacturers to invest heavily in alternative energy sources to sustain uninterrupted production activity.
“While some manufacturers have invested in diesel generating plants, some others are utilising gas plants.
“The costs associated with these plants are further increased by expenditure on spare parts and other energy management apparatuses such as stabilisers, UPSs, and Inverters,” MAN President, Mansur Ahmed said.
He lamented that, unfortunately, the cumulative expenditure on these alternative energy sources and the high tariff associated with supplies from the national grid majorly account for the high cost of production in the sector.
According to Mansur, electricity supply provides a significant share of the total cost of production in the manufacturing sector, with the share of energy standing at a colossal 40 per cent.
He said following the above circumstances, expenditure on alternative energy sources in the manufacturing sector stood at N45.04 billion in the second half of last year as against N57.75 billion recorded in the corresponding half of 2020, indicating N12.71 billion or 22 per cent declined over the period. However, it increased by N12.86 billion when compared with N32.18 billion recorded in the preceding half.
“This is a major reason for the poor competitiveness of made in Nigeria products and has been a key impediment to the export potential of the manufacturing sector,” he lamented.
The MAN president, however, said in recent times, electricity supply to the manufacturing sector through the national grid has maintained consistent improvement in terms of average daily supply and outages. Consequently, he said in the second half of 2021, daily electricity supply to the sector averaged 11 against 12 hours in the corresponding period of 2020 and 11 hours in the preceding half.
“It is, therefore, important that the Nigerian Electricity Regulatory Commission (NERC) continues to drive the electricity sector by ensuring the effective and beneficial implementation of On-grid/Off-grid, Mini-grid, and Eligible Customer initiatives,” Mansur said.