Power has been regarded as the fulcrum of development worldwide, but in Africa and in Nigeria in particular, that has not always been the case; BENJAMIN UMUTEME reports.
Before the privatisation of the Nigerian power sector, electricity power supply was best described as erratic and abysmal as Nigerians were made to most of the time pay for power not used.
The situation led many manufacturing concerns to relocate to neighbouring countries while others that could not relocate were forced to close shop due to the amount they expand on powering themselves.
And several years after privatisation did eventually take place, it has been the same old story with different explanations.
This has impacted negatively on Small and Medium Enterprises (SMEs) seen by the majority as drivers of any economy. SMEs are 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 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.
SMEs key to growth, devt
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
Seven years ago, 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.
National grid collapse
Again, Nigeria was plunged into darkness as national grid collapsed for hours
On January 16, this year, the national grid experienced its first collapse in 2020 resulting in blackouts across the country.
According to reports, the national grid collapsed more than 10 times in 2019 alone. Transmission Company of Nigeria (TCN) stated that, “There was system disturbance which occurred at about 12.34 pm affecting some parts of the country.
“As at 1:10 pm, supply was restored to Abuja and most parts of the affected areas. TCN is still working to completely restore and stabilise the nation’s grid.”
In the same vein, Ikeja Electric (IE) which also confirmed the grid collapse in a statement on its Twitter account, said another collapse of the grid occurred at 2.15 pm after the previous incident.
“Dear customers, the outage you are experiencing is due to a system collapse of the grid which occurred this afternoon at 12.36 pm. All parts of IE’s network are affected. Another system collapse was recorded at 2.15 pm today. Restoration efforts are ongoing. Kindly bear with us,” the electricity distribution company said.
Electricity tariff hike
Early this year, the Nigerian Electricity Regulatory Commission (NERC) approved an increase in electricity tariff by the 11 Electricity Distribution Companies (DisCos) in the country.
It stated that the order super-ceded the earlier one issued on the subject matter as “the new tariff regime takes effect from January 1, 2020, noting that the order had taken into consideration, other actual changes in relevant macroeconomic variables and available generation capacity as at October 31, 2019.
The Commission said the order was in line with updating the Multi Year Tariff Order operating -2015 Tariff Order for 2019 in line with the provisions of the amended MYTO Methodology.
According to the publication, for the Abuja Electricity Distribution Company residential customers R3 that were paying N27.20 per unit are to now pay N47.09. NERC stated that the customers are now to pay N19.89 more per unit representing 236.75 per cent increase.
Implication on businesses
With this twin challenge of expected tariff increase and the epileptic power supply, where does this leave businesses?
In Nigeria, getting access to constant power supply is a major concern for business. As at December 2019, an average household in the country only had access to six hours uninterrupted power supply out of the 24 hours that exist in a given day. This is why the use of generators as an alternative power source has come to stay.
In Lagos, it has become a joke that nine out of every ten households have at least one power generator as an alternative source of power. Over the past decades, successive governments have unsuccessfully endeavoured to tackle Nigeria’s energy deficit without sufficient financial investments in the power sector.
Alas, this continues to impact negatively on businesses that most times depend on electricity to operate. The implication is that small business who cannot afford to get alternative source of energy to continue their business are left at the mercy of the ‘hope.’
A pretty trader that resides at Jikwoyi Phase 4 in the Federal Capital Territory (FCT), fondly called mama Ifeanyi by her customers, said she has continued to loss patronage as most times her customers have had to go elsewhere to buy ‘pure water’(sachet water) because her own is not cold enough.
According to her, the frequent power outage does not allow her freezer to cool water properly.
“You know that the dry season people prefer to drink cold water, so when they come and I can’t give them cold one they move to my neighbours who most times have cold drives. Before I used to sell up to eight bags of water, but for the past one week, I now sell five. I can’t blame them people need cold water. I can’t afford to buy a generator that can ‘carry’ my freezer,” she said.
Mama Ifeanyi’s is one of a long line of small businesses that are struggling to survive due to what many refer to as “the wickedness of NEPA.” Across the country, many industries have closed down due to epileptic power supply in their area of operation as the erratic electricity normally eats into manufacturers’ profits and growth is stunted.
Analysts say the cost of running businesses on generators definitely eats into profits and does not allow them to expand. This may, at times, affect prompt payment of workers’ salaries.
The Manufacturers Association of Nigeria (MAN) stated that, “The major drawback to business growth is inadequate supply and exorbitant cost of generating electricity. Energy cost constitutes about 40 per cent of production cost. This is the reason Nigerian products are not competitive.
“These are major constraints that impede competitiveness and exert overbearing pressure on the bottom-line of manufacturing concerns.”
For Dauda Mohammed, who operates a barber’s shop at Phase 3, Jikwoyi, a suburb of the 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.
