Manufacturers incur N67.8b cost as dip continues in public power supply
By Jeph Ajobaju, Chief Copy Editor
Manufacturers incurred alternative energy source cost of N67.8 billion in the first half of 2022 (H1 2022), climbing 110 per cent year-on-year (YoY) from N32.2 billion in H1 2021.
The Manufacturers Association of Nigeria (MAN) disclosed this in its H1 2022 Economic Review which highlighted increasing dependence on self-generated power supply and the consequences.
“The poor power supply from the grid fueled self-energy generation among manufacturers as expenditure on alternative energy source soared to N67.77 billion in the first half of 2022 (year-on-year) up from N32.18 billion recorded in the first half of 2021, and N45.04 billion of the second half respectively,” MAN Director General Segun Ajayi-Kadir
“Although average daily supply to the sector increased marginally to 12 hours in the first half 2022 from 11 hours in the second half of 2021, the average number of outage per day increased six times from three times recorded in the preceding half, which more than off-set the increase in supply in the period.”
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Manufacturing output down
Ajayi-Kadir disclosed the harsh operating environment pushed manufacturing output down from 5.8 per cent in Q1 2022 to 3.0 per cent in Q2 2022, according to Vanguard.
He urged Abuja to “carry out further investment in the electricity value chain and commit to adding 10,000 mw to the current electricity distributed in the country, embrace and support significant development of energy mix.”
He reiterated Nigeria’s huge potential for solar and wind energy and advocated resuscitation of existing refineries to produce fuels locally.
“Review the gas price for domestic consumption to be in tandem with the export price which is about $3.25 per cubic meter.
“Improve the level of forex allocation to the productive sector including manufacturing.”
Rising cost of doing business
MAN noted in its report average lending rate rose 4.5 percentage points to 23.5 percent in Q2 2022.
“Average lending rate to the sector from the commercial banks increased to 23.5 percent (year-on-year) up from 19 percent of the corresponding half in 2021, but declined by 0.5 percentage point when compared with 24 percent interest charged to manufacturers in the second half of 2021.
“The growing lending rate in the economy is underscored by, among others, the upwards review of the Monetary Policy Rate (MPR) from 11.5 percent to 13 percent by the CBN in May 2022 even though the asymmetric corridor at +100/-700 around MRP; Credit Reserve Ratio (CRR) at 27.5 percent and Liquidity Ratio at 30 percent remained unchanged; and the rising global interest rate due to the Russian-Ukrainian face-off.”
MAN lamented the “sector is generally faced with limited investment in domestic production of raw materials for utilisation in most of the sub-sectors, which is as result of limited funding and policy incentives in the country.”
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