Time To Save The Manufacturing Industry | Independent Newspapers Limited
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Time To Save The Manufacturing Industry

Posted: Mar 7, 2016 at 3:26 am   /   by   /   comments (0)

Last week, the world was jolted when the Manufacturers’ Association of Nigeria (MAN), disclosed that its members spent a whopping N9 billion to generate power on daily basis in order to keep their manufacturing processes buzzing.

The National President of the Manufacturers Association of Nigeria (MAN), Dr. Frank Udemba Jacobs, during a courtesy visit to the Minister of Science and Technology, Dr. Ogbonnaya Onu, in his office in Abuja, put the daily cost incurred by its members in generating electricity to power their industries at more than N9 billion, and described the supply of power from the national grid as horrible. Analysts say that was an urbane manner of highlighting the pains of manufacturers in a hellish environment, since the majority of manufacturers still generate their electricity to power their machines.

According to him, “From last year, nothing has changed in the sector. We all know that in terms of generating power, our members spend billions of naira in generating power and this is going up daily because we are daily increasing capacity. I think, it is more than N9 billion daily.”

This figure which translates to about N2.3 trillion per year is too much for an industry hobbled by low capacity utilisation, waning consumer demand, multiple taxes and levies, outlandish cost of funds, inflation and hurting exchange rate that in league, constitute a harsh operating environment. More disturbing is that the president of the Nigeria Labour Congress, Comrade Ayuba Waba, had before now said at a business luncheon for managing directors/chief executive officers organised by the Ikeja branch of MAN in Lagos that manufacturers spent N3.5 trillion annually to run power generators for production, due to the collapse of public electricity. We totally agree with the NLC that the energy sector is critical to the manufacturing sector of the economy, and share its belief that the seriousness of initiatives by the government, aimed at reviving the economy must make the resurgence of the sector a priority. Economic infrastructure, such as road and power supply, among others, are indispensable factors in production and their deficits have made manufacturing difficult, leading to the closure of more than 200 members as recently reported, and a lot more relocating to other countries perceived as more investment friendly.

Nigeria has spent more than N2.7 trillion on the power sector since 1999 with power generation increasing marginally from 1, 750mega watts in 1999, to a meagre 4600 megawatts according to presentations made last year to the Senate’s Ad- Hoc Committee on Power at the on-going investigative session on the sector.
The N2.7trillion was total sums of monies appropriated and cash-backed for the sector during the period, in addition to $8.34billion spent on National Integrated Power Projects (NIPP) from excess crude account funds.
Out of the total N1.565trillion appropriated for the sector during the period, N948billion was released, in addition to N155 billion also injected into the sector in form of subsidy under the Multi Year Tariff Order (MYTO) to cushion the shortfall of funding, which when added to $8.34m spent on NIPP projects, gives a total of N2.7 trillion. It was further disclosed that the sector was even more poorly managed before 1999, as no single engineer was employed into it, 19 years before the time and out of the 79 generation units available before then, only 19 were functioning with power generation of 1, 750 megawatts.

It is appaling that after spending this huge sum of money on the sector, changing the name of NEPA to PHCN and eventually unbundling it into Gencos and Discos that are now privatised, power supply in Africa’s largest economy today still dawdles below 5,000megwtts, when South Africa has long achieved more than 40,000 megawatts.

In a country that seeks to diversify its economy in response to the shocks and volatility of the global oil market that has drastically reduced its revenue inflow, this is unacceptable. Situations where Nigerians burnt their hard-earned N17.5 trillion on power generation alone in five years are counter-productive and remain antithetical to economic progress, wealth and job creation. When manufacturers close shop, the economy suffers. Investors lose their stakes, employees lose their jobs, their dependants are negatively affected, government loses tax revenue, and the larger society is plagued with social tension. We believe the change mantra of this administration should immediately stem this ugly scenario. This underpins our position that the real sector of the economy, especially manufacturing, must be urgently salvaged before it goes into extinction.