ECONOMY-NIGERIA: Energy Crisis Cripples Industries

By Toye Olori Reprint | | Print |

Toye Olori

LAGOS, Apr 23 1998 (IPS) - An erratic electricity supply coupled with a dire fuel shortage in the past six months have crippled Nigerian manufacturing concerns, according to industrialists here.

Many medium and small-scale industries have already closed down as a result of the energy crisis which has also severely constrained the operations of larger industries and increased production costs, a situation which might force the sector to downsize and raise the prices of products.

“The deterioration has further deepened the pains of doing business in the Nigerian economy,” according to the Lagos Chamber of Commerce and Industries (LCCI) which warned, in a recent publication, of the likelihood of consumer goods being priced beyond the reach of average citizens whose purchasing power has already been weakened.

“There is a dire need for urgent reforms of the Nigeria energy sector, structured to induce a greater level of private sector participation,” it said. “The current funding and management of the sector need to be made more efficient to enable the refineries to function effectively and optimally and to facilitate an increased level of electricity generation and more efficient distribution system.”

The reasons for the crisis are obvious.

Nigeria’s four refineries, with a capacity to produce 445,000 barrels of refined petroleum per day, are under repair and the country now imports refined petroleum products.

Electricity generation and distribution are handled solely by the state-owned National Electric Power Authority (NEPA). Analysts say this monopoly has led to corruption, inefficiency, ineffectiveness and nonchalance among the utility’s staff.

NEPA management, on the other hand, complains of limited financial resources resulting from low tariffs, the vandalisation of materials and equipment, and the constant breakdown of obsolete equipment along its network.

Eight turbines at the main hydro-electric station at Kainji, central Nigeria, with a total installed capacity of 760 megawatts, have packed up.

Some of the generating units at Nigeria’s four thermal stations are not working and the stations are thus producing much less electricity than they could. For example, at the nine-year-old Egbin Thermal station here, which supplies 60 percent of the nation’s electricity, all the generating units are out of work.

The Afam Power station in the Niger Delta state of Rivers, constructed in 1964 with an installed capacity of about 427.5 megawatts and with 18 units, has only a few of its components functioning.

The four thermal stations, according to Kunle Oluwasanmi, Minister of State for Power and Steel, require 450 billion naira (about 5.3 billion dollars) for repairs, but in the 1998 budget, only three billion naira was set aside by government for the rehabilitation of NEPA’s power stations.

However, industrialists argue that the solution to NEPA’s problem is not the amount of money allocated to it, but the early privatisation of the parastatal as promised — along with the privatisation of the petroleum sector — in this year’s budget speech.

“Privatisation will break the present monopoly and unless this is done quickly, the problem will persist,” says Joseph Akinbiyi, a small-scale industrialist.

In 1997, 65 percent of the working hours of the manufacturing companies in Lagos were lost to power outages, according to the Ikeja branch of the Manufacturers Association of Nigeria (MAN).

As a result of the inefficiency and ineffectiveness of NEPA in the provision of electricity, industrialists across Nigeria have had to resort to installing private generators in their companies so as to keep running.

The unreliable electricity supply caused Nigeria to import 3.3 billion naira worth of generating sets in 1996 alone, according to statistics made available to IPS here.

But the generators are run on diesel or petrol and with the scarcity of petroleum products in the last eight weeks, most of them have become idle. So have the industries they powered. Reports from many parts of the country show that the fuel scarcity has impaired the operations of manufacturers.

For instance, operations at the multi-billion-naira Benue Cement Company in the central state of Benue have been halted because there is no diesel available. This has led the 17-year-old company to lose several millions of naira.

“We have the money but we don’t have the fuel to buy despite our several trips to Lagos and Port Harcourt in search of fuel,” says Solomon Nyangba, Managing Director of the company.

And in a recent letter to the Nigerian Textile Manufacturing Association, the personnel manager of a major textile mill here said that his company intended to shut down because of the scarcity of diesel and irregular supply of electricity.

Last year, the transnational, Cadbury, temporarily shut down its factory for the same reasons.