By Merit Ibe
Manufacturers have decried the high energy cost now affecting production and threatening survival of the sector.
The operators are also lamenting that more multinational manufacturers were leaving due to increasing energy costs and unfriendly environment, as they have suffered huge economic losses.
Consequently, the escalating energy costs, alongside other unfriendly policies and poor infrastructure among others have negatively effected the economy, reflecting in the high production and operating costs as well as potential suspension of operations for businesses that are unable to pass the costs to consumers.
The rising energy costs have disrupted productive activities as factories self-generate more than 14,000 megawatts of electricity due to poor supply from electricity distribution companies.
Commenting on these hurdles to the growth of the sector, President, Manufacturers Association of Nigeria, (MAN), Francis Meshioye, queried why the country was exporting when it should ensure it has adequate electricity supply at home.
“It is a bit awkward. If we need electricity here, why do we need to export it? Why don’t we ensure that we have an adequate electricity supply at home? We rejected the hike in electricity tariff because, in the first instance, energy costs are very high for manufacturers, particularly those who consume much, like steel manufacturers.
“It takes an average of 35 to 40 per cent of their total costs. Any increase in electricity tariff makes it harder on us. The harder it is, the harder it will be for consumers. When this is so, it means that the demand for products will drop and the profit margin will be low.
“The tax that you will have on this margin will be low as well. So, the government will also lose. One thing that I emphasise is that there is a lack of efficiency on the part of the DisCos.
“They are unable to collect all the money for their supplies. They rely on estimated billing in some cases. This is not good. They need to ensure that all electricity users are metered.
The first thing they need to do is ensure that there is an efficient collection of revenue. We need to concentrate and ensure that locally, we have a supply of electricity to all industries and households.
“When you satisfy the domestic front, then, you can now satisfy others.
Let’s look at the petrol subsidy that was removed recently. I understand that there was a way to get PMS across the border illegally. You find that this is now difficult because the price locally and over there is very close. This is good because it deters people from taking the petrol that we need here across the border and has a shortage.
“With electricity, we should first satisfy our domestic needs before we start to service our neighbours. This is my personal view and I believe this will be the view of other prudent people.”
The MAN boss advised that government should engage the stakeholders.
“We are willing to dialogue with the administration and see how we can support the economy without jeopardising the interest of the manufacturers.
“The real sector is very important in growing the economy. They are the major employers of labour besides agriculture. If we have growth in the manufacturing sector, the dependence on imported products will be minimised. This means that the forex, which is very expensive to come by, will be saved.
On his advice to members, who are exporters in terms of boosting manufacturing activities, Meshioye said: “We will tell our members to do more, but all these things are based on competitive advantage. If you want to export a product, it is fine, but at what cost are you going to export it? What will be your price? If the cost is astronomically high, it will be difficult to export. It is a circle. Of course, the export base should be good enough to support the floating exchange rate, but we need to have a good economic base to do that.
“We plead with the government to make and implement policies that will motivate and stimulate manufacturing. If we stimulate investments in manufacturing, we will definitely churn out more products.”
For his part, Chairman of MAN Gas Group, Dr Michael Adebayo, noted that power was a major problem for manufacturers, noting that his own company, uses gas, black oil and diesel to power its production.
“Energy is a major issue in the manufacturing sector. By the time you spend money on gas, black oil, diesel and other energy sources, your production cost will be so high,” he said.
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