Yemisi Izuora
Nigerian manufacturers are facing high tariff structure and upon that bear frequent supply shortages which has caused them fortunes in terms of production cost
They are currently considering embarking on developing Independent Power Projects (IPP) as they express fresh worry over the exorbitant cost of energy, citing attendant operating costs and lack of competitive edge.
Even when they acknowledge that Nigeria may not have the most expensive tariff in Africa, most manufacturers and industrial clusters/layouts are on Band A with a tariff of N209.50/kWh, which promises 20 hours of electricity daily. Some manufacturers said that though the power situation improved last year, they still spend a premium on not just tariffs but also alternative energy.
The Executive Director, Universal Luggage Limited, and past chair of the Manufacturers Association of Nigeria (MAN) Apapa, Frank Ike Onyebu, said there has been a recent slight improvement in the power situation.
“However, we still have regular issues of unexplained outages. Sometimes, we are told that power would be switched off for routine maintenance, for say an hour, and it extends to three or four hours. But we do not even complain anymore.
“Last year, we used to experience very regular outages that would last two straight days with zero explanations on this same Band A that is supposed to be at least 20 hours of supply daily. But in the last couple of weeks, it has improved.”
Calling for the lowering of the Band A tariff to help the manufacturers become more competitive regionally and across the continent, he said the electricity bill is still too high, as they pay between N180 million and N220 million monthly.
“This is how it is generally for companies around the Amuwo-Odofin industrial cluster. We pay through our nose monthly; this is in addition to still running alternative sources of energy when the power is out. How are we supposed to compete favourably when energy costs remain this exorbitant?” he asked.
He revealed a plan to gradually divest from the national grid and adopt solar energy during the day, while relying on the grid for nighttime production.
“There are talks on the table from our national body for IPPs for the different industrial clusters and zones, and we hope this comes to fruition quickly. The cost of energy is too high; even the alternative sources are also expensive, which is a big problem for manufacturers,” he said.
The MAN Chairman, South-East Kaduna, Kabiru Kassim, noted that power supply was extremely poor last year. He expressed optimism that this year would be better as the group has reached an agreement with Kaduna Electricity Distribution Company (KEDCO).
“Towards the end of 2025, supply picked up, and we hope it gets better this year. Our issues with KEDCO have been resolved, and we have reached an understanding with the distribution company. We asked for better consideration for manufacturers and industrial layouts to improve our production capacity, and they have promised to deliver, so we remain hopeful,” he said.
Speaking on going into IPPs, he said there are not enough plants to produce the level of energy manufacturers need, but that many companies have started developing mini-grids. “However, one can only generate within one’s facility capacity currently. If my generating capacity, for instance, is 5MW and I have an excess of 2MW, I can only sell after I have gotten a licence from NERC. This is a bit cumbersome, but it is still better than how it was in the past when we couldn’t sell or transmit to others,” he said.
Pointing out that the energy bill is still on the high side, he said it ranges between N11 million and N20 million for most of the companies under his jurisdiction. “We were placed under Band A and while the light situation has improved a bit this year, the bill is still on the high side. This can be quite discouraging, especially as production and operating costs continue to skyrocket,” he said.
The Chief Executive Officer (CEO), Kazih Kits, Dr Chinedu Otakpor-Azih, said their power supply has gone from bad to worse. Noting that their own situation is even more peculiar in the Iju/Ishaga area where her factory is located, she said robbers carted away the transformer’s wires in November last year.
“When we reported the matter to the DisCo in charge of the area, they said if we wait for them to replace it, it will be at the end of Q1, in March. We were told that if we want power, we should raise money and buy it back ourselves. This is so unfair, why are we the ones saddled with the responsibility of buying wires and cables and building gates to protect them from being stolen again? Even after we bought the wires and made the necessary payments, the light situation deteriorated completely. In fact, I don’t think we are under any Band in this area, that is how bad the light situation is. We have been relying on diesel to produce, this is unsustainable.
“In addition to all these hardships, our taxes have increased. What do businesses get in return for all we do and endure? We spend hundreds of thousands on diesel monthly and have completely stopped night production to manage our diesel costs. Even during the day, we stop production at exactly 5pm and turn off the generators. Despite the poor supply, the electricity bills come in like clockwork.
“In the past, we delivered to customers in about a week or 10 days; but now, because of the power situation and the fact that we are rationing diesel, delivery time has gone up to three weeks.”
She noted that they have the capacity and manpower to run 24-hour production but the poor light situation continues to hamper them. “Now compare with our counterparts from other countries that have affordable power, no diesel expense and are able to run 24-hour shifts. How does the government want us to compete, sell at a reasonable price, make profit and still remain in business?” she queried.