Over the past nine years, Nigerian manufacturers have been grappling with the soaring costs of alternative energy sources. According to data from the Manufacturers Association of Nigeria (MAN), expenditure on alternative energy (excluding power from distribution companies) has surged by 82%, reaching N144 billion in 2022 compared to N25 billion in 2014.
To combat the unreliable power supply from distribution companies, manufacturers have been forced to self-generate power at a substantial cost. In total, they have spent approximately N783 billion during this period to keep their factories running.
The breakdown of data reveals that manufacturers spent N129.95 billion in 2016, N117.38 billion in 2017, N93.11 billion in 2018, N61.38 billion in 2019, N81.91 billion in 2020, and N71.22 billion in 2021.
Energy costs have become a major concern for Nigerian manufacturers, accounting for 35% to 40% of their total expenses. This high cost burden is significantly impacting the profitability of businesses, prompting some multinational manufacturers to contemplate exiting Nigeria.
In response to the potential increase in electricity tariffs, MAN has rejected the proposal, citing the already exorbitant energy costs borne by manufacturers. They believe that any further tariff hikes would exacerbate the challenges faced by the industry, leading to reduced product demand and squeezed profit margins.
Despite manufacturers’ efforts to address the issue, the escalating costs of alternative energy sources remain a pressing challenge for the Nigerian manufacturing sector, affecting its competitiveness and long-term sustainability. The industry is seeking solutions to ensure a reliable and cost-effective energy supply, which is vital for economic growth and development in the country.
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