Unstable power supply costs manufacturers but they are optimistic with new Electricity Act
By Jeph Ajobaju, Chief Copy Editor
Unstable power supply costs manufacturers about N10.1 trillion every year, laments the Manufacturers Association of Nigeria (MAN), a loss that amounts to 2 per cent of Gross Domestic Product (GDP).
MAN said the situation places Nigeria among the worst countries to do business with a rank of 171 out of 190, but expressed optimism the Electricity Bill newly signed into law by President Bola Tinubu will help tackle the problem.
MAN reiterated current power supply is not adequate to satisfy the energy requirements of manufacturing and the entire population of more than 200 million people.
The Electricity Act 2023, if well implemented, promises to be a major game changer for the manufacturing sector, MAN enthused in a statement.
“As an advocacy Association, MAN has always pushed for the need to charge cost-reflective electricity tariff to avoid extortion of our members.
“Fortunately, it is of great delight that this new Act fits like a glove as it will help actualise a cost–reflective tariff considering the healthy price competition it will bring between the states and private investors,” the statement said.
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Need for stable power supply to attract foreign investment
“The country’s epileptic power supply is one of the prominent reasons for the relocation of some of our members,” the statement added, per The PUNCH.
“Provided the new Act adequately addresses the challenges in the power sector, we are quite optimistic that such development will encourage the inflow of manufacturing FDI [foreign direct investment], boost the performance of the sector and increase the sectoral contribution to the economy.”
Nigeria’s manufacturing stagnant for 5 years
Nigeria’s manufacturing contributed N32 trillion to GDP between 2018 and 2022 but the sectoral growth was stagnant in the five years, the National Bureau of Statistics (NBS) has disclosed.
The NBS said GDP for the five years grew to 358.32 trillion, out of which manufacturing contributed N32 trillion or 9 per cent.
The breakdown is as follows:
- 2018 – GDP N69.7 trillion (manufacturing contributed N6.4 trillion)
- 2019 – GDP N71.38 trillion (manufacturing N6.47 trillion)
- 2020 – manufacturing contributed 8.99 per cent
- 2021 – manufacturing contributed 8.98 per cent
- 2022 – manufacturing contributed 8.92 per cent
Experts and players listed factors that led to stagnant manufacturing output to include high energy cost, foreign exchange (forex) scarcity, inflation in the price of raw materials and inputs, and high interest rate.
Ide John Udeagbala, Nigeria Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA) President, warned a 9 per cent average contribution of manufacturing to national output shows Nigeria is falling below its industrialisation goals.
“I think that a situation where less than one-in-ten products produced in the Nigerian economy is the outcome of an industrialiaed process does not bode well for our economic growth and development objectives. This is because industrialisation is well-established as a pathway to development,” he said.
“Although Nigeria has an advanced services sector, an average manufacturing contribution of 9 per cent to national output (GDP) indicates that we are falling well below our industrialisation goals.”
MAN Director General Segun Ajayi-Kadir stressed that “conceptually, manufacturing is unarguably the backbone of national economic development.
“It is countries that can transform their raw materials into a wide range of furnished goods and add prosperous value. Beyond the role of the sector in the domestic economy, manufactured exports expand the scope of trade, commerce and foreign exchange inflow.”
Prioritising manufacturing
Stakeholders at the 2023 Equipment and Manufacturing West Africa (EMWA) conference implored Abuja to prioritise the manufacturing sector through policies that encourage local and foreign investment.
“Despite how the election year has turned out to be and with a new government in place, I urge them to come out, collaborate with the private sector and put manufacturing at the forefront of their policies to build a better Nigeria,” Event Director Joseph Oru pleaded on the sidelines of the conference.
NBS report on GDP for the first quarter of 2023 (Q1 2023) shows manufacturing slumped from 4.28 per cent in Q4 2022 to 1.61 per cent in Q1 2023.
However, its contribution to GDP was 10.13 per cent in Q1 2023, higher than the 8.40 per cent in Q4 2022.