Nigeria’s powerless supply and crawling small businesses

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Factual Pursuit of Truth for Progress

 

Growing up in Nigeria comes with lot of fun and experience. Several elements (especially socio-economic) come into play.

It is a way of life to adapt to and adopt certain challenges as part of life. One of those socio economic challenges that have become a norm is power cut. The response to the flashing of light with a defeaning ‘Up NEPA’ scream by both the young and old has defied changes that have occured even when NEPA metamorphosed into Power Holding Company of Nigeria (PHCN). It has been difficult for that mantra of excitement to change several years after.

Let’s even keep the story of NEPA for another for another day as the long lasting impact of epileptic power supply has gone beyond the very many mutations by the power sector.

Many are aware that Africa gets cold when Nigeria speaks about natural endowments and human resources it is blessed with. The issue however that has downplayed the enviable position of the ‘Giant of Africa’ has been the negative impact of poor power supply on small medium and medium enterprises.

It is a known fact that Nigeria loses more to importation of goods that can be produced in the country and with a large churn out of technically competent manpower across various disciplines amd spheres of endeavor.

The country had sought to grow small scale businesses, which would cater for domestic needs and exports, but the realisation of this tall dream has eluded the country with the shortage of power supply which cannot guarantee business survival.

What is the future of a growing business when it spends more to power production and depletes the percentage of profit margin?

It is painful that so many companies have left Nigeria for their respective countries due to the shortage of power supply, which is detrimental to output ratio.

Recall that recently, the country banned importation of products which can be manufactured locally.

This decision was interpreted differently from different perspectives with many saying the country only suffered the masses within the period of ban as many products which were banned are not produced in the country at commercial quantity that can meet the huge demands by the consuming public.

In 2015, the National Export Promotion Council under the leadership of Segun Awolowo unveiled the ‘Buy Nigerian Products, Grow the Naira’, laudable as it sounded but plagued with huge limitations in terms of achievability.

The World Bank had, in a recent statement, said the economic cost of power shortages in Nigeria is estimated at around $29 billion. This makes the figure equivalent to two per cent of Nigeria’s Gross Domestic Product (GDP).

According to the global bank, about 47 per cent of Nigerians do not have access to grid electricity and those who do have access, face regular power cuts.

This was followed with a report in June which stated that electricity accounts for the biggest costs to daily operations for many small and medium scale businesses in Nigeria.

Pricewaters had in a report titled “PwC’s MSME Survey 2020 – Building to last”, stated that Nigeria’s power sector is “overwhelmed by a myriad of challenges ranging from operational inefficiencies to infrastructure deficiencies”.

These challenges have resulted in inadequate electricity supply that has had an adverse impact on Nigeria’s business environment. It had also lingered in years, plunging the hope of a vibrant manufacturing sector into illusion.
Reports say seventy-six million Nigerians or 40.7% of the Nigerian population (more than twice the population of Canada) are not connected to the national power grid.
For those connected, power supply is a serious problem as about approximately 90% of total power demanded is not supplied.

The problem was said to be that, presently, total installed generation capacity is 12,522 MW but average operational generation capacity is just 3,879MW of which 7.4% is lost in transmission, and up to 27.7% load is rejected at distribution.
This leaves Nigeria with just about 2,519MW. Yet, Nigeria’s electricity demand was estimated at 24,380 MW in 2015. As a result, Nigerians self-generate a significant portion of their electricity with highly polluting off-grid alternatives and at a cost that is more than twice the cost of grid-based power.

This leaves the question of the competitiveness of Nigeria’s small-scale industries without access to affordable and reliable power.

Observers say years ahead, electricity demand is expected to rise significantly. Household electricity demand, which has the largest share, will rise due to growing urbanization (at a rate of 4.23% per annum) and population growth (estimated at 2.7% per annum, while global growth rate is 1.1%) at rates more than twice global averages.

Industrial and commercial demand is also expected to increase as Nigeria slowly rises from the recent recession (with projected gross domestic product rates trending between 4.50% and 7%. A GIZ study estimates electricity demand to rise to 45,490 MW by 2020, and 213,122 MW by 2040.

Although the results of electricity demand studies vary widely, they all conclude that the current gap between supply and demand is already very substantial and that, it will become more entrenched under a ‘business as usual’ scenario.

KAFTAN Post sought the views of some small scale business owners who said power has limited their pace of growth.

Korede owns a small processing company in Kuto, Abeokuta, the Ogun State capital. He said he is finding it had to run his production of polythene bags due to power supply.

“I have a small business that has not grown in years because of power supply. It is difficult running diesel for hours and not being able to see the profit after investment.

“When we try to factor the cost of production into the selling price, the consumers would quickly react and go for competing product.”

This complaint by Korede represents the challenges faced by several other small-scale entrepreneurs, especially in the processing and storage value chains, who have not broken even due to the usurping of their reserve to maintain power supply in their business.

Experts also say if Nigeria is to gain from the African Continental Free Trade Area (AfCTA) deal, local production capacity of local businesses have to be boosted especially by adequate power supply.

Until then, it remains a tall dream.

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