Shortage of electricity supply has been taking a huge toll on the profitability of manufacturers, with a yearly economic loss valued at about N10.1 trillion or two percent share of Nigeria’s Gross Domestic Product (GDP).
Making this known at the weekend, the Manufacturers Association of Nigeria (MAN) lamented that the unfavourable situation in the power sector has positioned Nigeria among the worst countries to do business with a rank of 171 out of 190.
MAN Director-General Segun Ajayi-Kadir, while reacting to the June 9 signing of the Electricity Act 2023 by President Bola Tinubu, however, said the Electricity Act 2023, if well implemented, promises to be a major game-changer for the manufacturing sector as it would address the numerous constraints within the sector.
According to Ajayi-Kadir, the Electricity Act 2023 has favourable implications for the manufacturing sector. He listed some of them including reduced cost of alternative energy, competitive and lower electricity tariff, improvement in the inflow of Foreign Direct Investment (FDI), and manufacturing performance.
Others, he said, include an increase in Internally Generated Revenue (IGR), improved infrastructure and less tax burden on manufacturers, more investment in renewables, backward integration, and energy security, and stable power supply and proper planning.
In response to the huge energy deficit forced by the age-long challenges in the power sector, Tinubu signed the Electricity Act 2023 on June 9, this year, replacing the Electricity and Power Sector Reforms Act 2005.
The Electricity Act 2023 is aimed at providing an all-inclusive framework that will serve as a guide to the decentralization of the power sector in order to encourage private investment and build a competitive electricity market.
Under the Electricity Act 2023, States, private companies, and individuals are now legally permitted to generate, transmit and distribute electricity.
Reacting to the development, MAN described the Electricity Act 2023 as “a more crucial milestone for the operations in the power sector.”
MAN, in a statement, noted that it was sequel to the constitutional amendment signed during the last days of the Muhammadu Buhari-led administration which allows states to generate, transmit and distribute their own electricity.
Ajayi-Kadir recalled that over the past decades, the Nigerian power sector has encountered much turbulence in its electricity value chain due to poor policy enforcement, over-regulation, instability of gas supply, and bottlenecks in its transmission network.
According to him, “These problems have culminated into erratic electricity supply, frequent power outages and persistent collapses of the national grid. For many years, the situation has stunted the growth of the economy.
“Consequently, access to electricity has remained a hurdle for millions of Nigerians. According to the 2021 report by the International Energy Agency, Nigeria’s 86 million is the largest number of people in the world without access to electricity.”
The MAN boss said no doubt, the current power supply is apparently inadequate to satisfy the energy requirements of the manufacturing sector and the entire population.
“As the largest energy access deficit in the world, Nigeria’s shortage of electricity supply has been identified as a hindrance to the profitability of manufacturers with an annual economic loss valued at about N10.1 trillion or two percent share of the country’s GDP,” he said.
Ajayi-Kadir, however, stated that notwithstanding, the Electricity Act 2023, if well implemented promises to be a major game changer for the manufacturing sector through some favourable implications.
He said for instance, that it will reduce the cost of alternative energy, pointing out, for instance, that last year, the total amount spent by members of MAN on alternative energy surged from N77.21 billion in 2021 to N144.47 billion.
“If fully implemented to the letter, the new Electricity Act will see to the drastic fall in the cost of alternative energy incurred by our members and we expect this to boost our profit margin,” Ajayi-Kadir said.
While also noting that the new Act will usher in a regime of competition and lower electricity tariffs, the MAN Chief said as an advocacy Association, MAN has always pushed for the need to charge cost-reflective electricity tariffs to avoid extortion of its members.
“Fortunately, it is of great delight that this new Act fits like a glove as it will help actualize a cost–reflective tariff considering the healthy price competition it will bring between the states and private investors,” he stated.
He also said the country’s epileptic power supply is one of the prominent reasons for the relocation of some of MAN members.
Ajayi-Kadir, however, pointed out that 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, boost the performance of the sector and increase the sectoral contribution to the economy.”
He further said the new Act will open greater investment opportunities in renewable energy, noting that for manufacturers, investment in renewables like solar will not only promote a cleaner climatic environment but ensure that energy consumption is cost-efficient.
“The cost savings will directly improve profit margin and promote further manufacturing investments,” he said.
Ajayi-Kadir further expressed confidence that the new Act will stabilize the power supply and also encourage proper planning.
His words: “The country’s epileptic power supply often destabilizes daily business plans of many of our small and medium members that cannot afford or maintain alternative sources of energy. A distorted business plan can be highly detrimental to manufacturing operations.
“Apart from causing sub-optimal capacity utilization, the amount of wastage can be highly unbearable. The new Act if fully implemented can re-write the story by stabilizing the supply of electricity to infant manufacturers and aid their planning for optimal delivery.”
Ajayi-Kadir also said it will lead to an increase in IGR, improved infrastructure, and less tax burden on manufacturers. According to him, Nigeria’s electricity market is one of the biggest in the world because of its massive population and growing demand for energy by households and businesses.
“Therefore, the amount of IGR that each state stands to accrue from the decentralization of the power sector is delightful. If properly utilized, such huge revenue can bridge the infrastructure deficits in many states without imposing further tax burden on manufacturers,” he pointed out.
The MAN DG, while noting that energy is the most vital input of manufacturers, said the empowerment of private manufacturing companies to generate their own electricity will unleash massive investment in backward integration activities which will no doubt be a major enabler of energy security within the sector.
The Nation
