OLAJIDE FABAMISE, Lagos
Low output and high input cost have pushed more production firms to opt for independent power projects (IPPs) in industrial clusters, spending over N500 billion annually on power plants.
Manufacturers said the strategy is to enhance sustainable electricity supply, even as the move became necessary, having waited on electricity distribution companies to provide steady power supply to no avail, amid high energy costs with which they have had to contend.
The Managing Director, Arewa Metal Containers Limited, Engineer Daudu Joachim, told LEADERSHIP Sunday that manufacturers used to spent an estimated N500 billion annually to run and maintain their power plants.
He said the high cost of sourcing dollars has made it very difficult for companies to bring in raw materials.
He pointed out that the Nigerian economy has remained and continued to remain unfavourable to businesses in the manufacturing sector, just as inadequate and poor infrastructure has also continued to wield severe pressure on operating cost, competiveness and efficiency.
Joachim said, “Manufacturing sector declined at a faster rate in June 2016. Manufacturing PMI [Purchasing Managers Index] dropped to 41.9 per cent in June 2016 compared to 45.8 per cent in May 2016. 14 sub-sectors of the 16 manufacturing sub-sectors declined in the month (ACCI).
“Manufacturing PMI in Nigeria averaged 48.23 from September 2014 to March 2017, reaching an all-time high of 54.0 in September of 2014 and a record low of 41.90 in June of 2016. The PMI reflects the economic health of the manufacturing sector based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment”.
Besides managing expenses, the move will also see to the return of more industries and increase capacity utilisation which has been at low ebb in recent times, and ultimately, the idea would also lead to the creation of more jobs for Nigerians and reduction in prices of goods.
LEADERSHIP Sunday recalls that members enjoyed an average power supply of seven hours in the first half of 2016, as capacity utilisation fell below 45 per cent.
The chairman of Manufacturers Power Development Company Limited, a subsidiary of MAN, Ibrahim Usman, who spoke with our correspondent noted that the poor power supply in the country was seriously affecting the manufacturing sector, hence the partnership geared at developing small capacity IPPs in its industrial clusters.
He explained that the project, which is in the pilot phase and expected to kick off with an industrial estate within Henry Carr in Ikeja, will enable manufacturers to manage their energy generation and consumption gain as well as strategise for power mix like solar, wind, waste-to-energy and biomass in capacities between five and 15 megawatts.
On the challenges that may arise with the implementation of the project, he said the pilot phase would assist operators in deploying the project on a larger scale.
Usman, who is also the vice president, North-west Zone of MAN, said the manufacturers would deploy incremental power generation strategy based on needs assessment in order to ensure that industrial clusters’ power demands are met.
His words: “There is no one model for all as different states have different needs. Talks are ongoing with strategic partners to deploy liquefied petroleum/natural gas in locations like Abuja, Kano, Ibadan, Enugu and Nnewi.
“It is going to be a case-by-case model for industrial firms. There are foreign technical partners willing to establish smaller capacity solar farms of five to 10 megawatts, even as waste energy will not be left out”.
On the modalities, Usman had at an earlier forum explained that off-taker industries would be full financial members of the association, as they will have the opportunity to enjoy friendly tariff, especially where multi-lateral donor agencies sponsor some key elements of the projects.
MAN President, Dr. Frank Jacobs, also told LEADERSHIP Sunday that the productive sector remains troubled due to various challenges in the operating environment.
“The absence of conducive manufacturing environment and basic infrastructure would continue to draw back the sector, except something urgent is done to reverse the situation. Power is a major cost for manufacturers and they will explore opportunities where it is cheaper to produce their goods”, he noted.