Small businesses in Nigeria face one challenge in common – poor power supply. From Lagos to Aba, Kano to Ibadan and Onitsha to Maiduguri, the cry is the same, it does seem that the much-vaunted talk of growing businesses may just be a mirage without the much-needed power; BENJAMIN UMUTEME writes
Seen as drivers of any economy, Small and Medium Enterprises (SMEs) are said to be independent firms that employ less than a given number of employees. However, SMEs are classified in terms of size, and financial assets. Companies that have up to 250 employees are classified as small and medium enterprises, while small firms are those that have up to 50 employees and a firm with 10 employees or less is regarded as micro-firms, respectively.
According to the Central Bank of Nigeria (CBN), small-scale firms are firms with a workforce of 11 – 100 workers and a total cost of not more than N50 million including working capital and excluding cost of land, while medium-scale firms is defined as firms that have a labour force of between 101 and 300 employees.
Importance of SMEs
The role small and medium enterprises play in the development of any country cannot be waved away. They have greatly contributed to the development of the country in terms of employment, growth, and marketing of goods and services.
With 8o per cent of the SMEs in the informal sector, the federal government is making efforts to integrate them into the formal sector as a means of developing the economy and solving her problems.
A great percentage of all registered companies in Nigeria are constituted by small scale industries and they have been in existence for a long time.
Over the years, the government has continued to formulate policies that will aid the empowerment, growth, development, and performance of SMEs through various forms of incentives.
For instance, the CBN has set aside N220 billion to be disbursed as loans to cooperative organisations under its Micro Small and Medium Enterprises Development Fund (MSMEDF).
SMEs remain a very important economic catalyst in developing and industrialised countries; in developed countries about 98 per cent belong to the Small and Medium scale sector.
The power sector
Six years ago, many Nigerians were optimistic that with the private sector directing the power sector affairs, the nation would not take power supply for granted. When the sector was privatised, it was with the intention of promoting efficiency, boosting supply, reducing average technical, commercial losses and most importantly ensuring that Nigerians get value for money.
With time, it is now clear to all that the sector is plagued with several challenges including but not limited to illiquidity, non-cost-reflective tariff and government interventions.
Illiquidity
However, after the privatisation, the power sector has been recording negative balance sheets. According to the Nigerian Electricity Supply Industry (NESI), the losses recorded by the sector translate to an average of about N1.5 billion monthly, totaling about N90 billion as at 2018. This loss is attributed to water, gas and transmission line constraints.
The power sector was reported to require an investment of about $7.7 billion to fix its dilapidated infrastructure and other relative machinery to clear the rot. However, this is despite the financial bailout of about N2.9 trillion the sector has received since 2015 to date.
Between 2015 and 2018, the Obama’s Power Africa, the USAID- initiative has injected about $1 billion into reviving the power sector. In 2015, the Federal Government, through the Central Bank of Nigeria (CBN), provided the sum of N213 billion as Power Sector Market Stabilisation Fund at a concessionary single digit interest rate.
Also, in 2016, the government created a N701 billion payment assurance guarantee through the CBN for the Nigerian Bulk Electricity Trader (NBET). In the same year, the Japanese government staked over 1.3 billion Yen, an equivalent of $11 million and N2.2 billion, to the development of Nigeria’s power sector. In 2017, the World Bank issued over $3 billion and then $2.6 billion, which amounted to $5.6 billion under review.
Lamentations galore
In spite of all these, it has been cries of lamentation from both service providers and the consumers. To make matter worse, in April, consumers – individuals, households, companies and others experienced prolonged power outages, following a huge drop of power supply from 4,000 megawatts to 2,039 mw.
Lamenting the worsening power situation the country, the Manufacturers Association of Nigeria (MAN) said manufacturers spent $378 billion on power generation in three years.
According to MAN president, Dr Frank Udemba Jacobs, it is largely due to unreliable public grid power supply across the country.
Udemba said manufacturers of consumable and non-consumable products spend N126 billion yearly to generate power, lamenting that the figure amounted to N378 billion when multiplied by three years.
He said the small, medium enterprises (SMEs) and multinational companies have, during the years under review, invested substantially in gas, coal and diesel to power their operations to remain in business, just as he noted that gas, coal and diesel have become veritable means of providing power to the manufacturing sector.
“The dwindling power supply occasioned by poor generation is having undesirable effects on the nation’s manufacturing industry. Besides the fact that capacity utilisation in the sector has reduced as many manufacturing concerns have either downsized or right-sized in order to cut down the cost of operation, the development has resulted in the low production of goods. In order to boost operation, small, medium and bigger manufacturing companies decided to generate their own electricity using gas, coal and diesel,” he said.
For manufacturer Adeola Yusuf, manufacturers are forced to buy diesel, forced to spend money on maintenance.
He said, “In fact in some cases, the burden creates another job of employing an engineer on full time because to use generator is a constant thing, so they need an engineer that will be on generator or electrical beat. So, it has an overall effect.”
Looking at the general economy, Yusuf said once this sector is affected, their outputs as well as cost of services are affected.
He said those who could not compete in this kind of hash economic environment are forced to quit because some of them cannot meet up with payment of rents, inability to pay for enough workers, because they cannot bear the additional burden of supplying power for themselves, which ought to be supplied by the government.
The chief executive officer of Onwuka’s Properties Limited, Mr. Onwuka Ukaegbu, said he had to shutdown to shut down his plastic factory due to incessant power failures.
“70 per cent of Nigeria’s problems would be solved if the government will fix the power sector. Without steady power supply, this country will remain import-dependent because production cannot thrive without electricity. My efforts to sustain my factory without steady power supply collapsed because at a point, I realised I could not afford to power my generators any longer due to the cost of diesel. I spent close to N50,000 on diesel every week; this is excluding other expenses.
“I still want to go back to start again if the issue of power is addressed but the present government is not helping matters. Everything has gone to worst since this regime assumed office. I urge them to do something very soon,” he said.
Corroborating Ukaegbu, a liquor seller, Madam Queen Okon, said her customers don’t patronise her again because of the power failure. According to her, “There are no customers because the few that came had to leave because they wanted chilled drinks and my generator cannot carry my two fridges that contain the drinks.”
According to the Vanguard, a news medium, “On April 23rd, 2019, average power sent out was 87,061.8 MWh/day. The reported gas constraint was 2,039.5 MW; “The reported line constraint was 0 MW. The reported frequency management constraint due to loss of DisCo feeders was 1,963 MW.”
For Dauda Mohammed, who operates a barbers shop in Phase 3 of Jikwoyi, a suburb of the Federal Capital Territory (FCT), it has not been easy as he has to spend more on generating power to run the business. He told our correspondent that on the average he spends N4, 000 every month on fuel.
According to him, except he does that he would lose many of his customers.
“Boss, there was a time I stubbornly refused to buy fuel for a week, and nobody told me to repent because I knew what I lost for those five days,” he said.
A welder in Abaji, also in the FCT, Mr. Ebenezer Dayo, lamented that the lack of stable electricity supply has continued to affect his work. According to him, he has had to resort to buying diesel to do his work, and that has affected his profit margin.
“As you can see, these doors and windows are for a supply to a contractor which at least if there is there is power supply I will make some saving but I have to go use gas welding to meet up the deadline, “ he said. Dayo also said despite the poor electricity supply, AEDC officials bring bill at the end of the month. “Even when they bring light, it will hardly stay up to two hours and they bring it only in the night. Sometimes I rush back to my workshop in the night to work.”
The country’s worsening power situation will not only continue to hinder industrial and economic development, it will further worsen the rising unemployment rate that concerned authorities are currently battling to address.
