Manufacturers under the aegis of Manufacturers Association of Nigeria (MAN) have expended about N81.91 billion on alternative energy sources in 2020. This followed frequent increase in petroleum pump price and epileptic power outages in the country.
Consequently, the expenditure on alternative energy sources increased by N20.53 billion from N61.31 billion recorded in 2019. MAN, in its Executive Summary Bi-Annual Review of the Economy for July to December 2020 (Half- Year report) obtained by New Telegraph, yesterday, and signed by its Director- General, Segun Ajayi-Kadir, explained that the increase in alternative energy expenditures was also attributable to the general high inflationary pressures on the economy.
Specifically, the increase in petrol pump price exerted significant influence on prices of some of the fuel used by the sector to generate electricity, which acted as burden on the manufacturers.
However, MAN, in the survey, stated that expenditure on alternative energy in the second half of 2020 increased to N57.75 billion from N34.70 billion recorded in the corresponding half of 2019; thus, indicating N23.05 billion or 66.4 per cent increase over the period. It also increased by N33.59 billion or over 100 per cent when compared with N24.16 billion recorded in the first half of the year.
The MAN DG explained in the report that electricity supply to manufacturers in terms of energy information generated from the sector showed consent improvement in electricity supply to the manufacturing sector.
The association said in the second half of 2020, electricity supply from the distribution companies to the sector increased to 12 hours on daily average from 10 hours per day on the average recorded since the first half of 2019. It added that average daily power outage had constantly averaged four times per day.
The survey emphasized that it was imperative for the Federal Government to address other frontline challenges plaguing the power sector, including gas shortages, limited distribution network, limited transmission lines, outdated equipment and electricity theft as it is affecting cost of production and also brewing hyperinflation.
He said that erratic power supply along the country’s electricity value chain was costing huge revenue leakages to the economy (gross domestic product) and other key sectors of the economy.
“Energy information generated from the sector has shown consent improvement in electricity supply to the manufacturing sector. In the 2nd half of 2020, electricity supply from the distribution companies to the sector increased to 12 hours on daily average from 10 hours per day on the average recorded since the 1st half of 2019. Average daily power outage had constantly averaged 4 times per day.
However, expenditure on alternative energy in the 2nd half of 2020 increased to N57.75 billion in the 2nd half of 2020 from N34.70 billion recorded in the corresponding half of 2019; thus, indicating N23.05 billion or 66.4% increase over the period. “It also increased by N33.59 billion or over 100% when compared with N24.16 billion recorded in the 1st half of the year. Expenditure on alternative energy source in the sector stood at N81.91 billion in 2020 as against N61.38 billion recorded in 2019.
“The increase in alternative energy expenditures in the sector was attributed to the general high inflationary pressures in the economy. However, specifically, the increase in the petrol pump price exerted,” Ajayi Kadir said.
According to the report, the real sector of the economy has been the biggest sector suffering inadequate power supply most in the country’s power sector with production cost rising on a daily basis from lack of electricity supply.
Similarly, the survey showed that inventory of unsold goods increased to N303.22 billion in the second half of 2020 from N202.16 billion recorded in the corresponding half of 2019; thus, indicating N101.06 billion or 50 per cent increase over the period.
It also increased by N28.83 billion or 10.5 per cent when compared with N275.39 billion recorded in the first half of the year. MAN noted in the report that inventory of unsold goods in the sector totalled N577.61 billion in 2020 as against N402.42 billion recorded in the 2019.
It added that the increase in inventory in the period was attributable to the general low consumption and renewed imports in the economy as global economies generally opened after months of lockdown.
However, the report stated that electrical and electronic sectoral group accounted for over 33 per cent of total inventory of unsold products in the period. “The group is having the challenges of low patronage, high smuggling and products counterfeiting which rubbed-off negatively on inventory,” the report said.
MAN pointed out that manufacturers’ CEOs Confidence Index computed from a survey of over 400 companies in Nigeria for the fourth quarter of 2020 declined to 42.06 points from 43.3 points achieved in the third quarter of the year. Unfortunately, points for third and fourth quar ters lie below the 50 neutral points, thus indicating lack of confidence in the economy by manufacturers.
On the country’s capacity utilisation, the report stated that manufacturing capacity utilisation edged up to 53.7 per cent in the second half of 2020 from 43.2 per cent recorded in the first half of the year; thus indicating 8.5 percentage point increase over the period. However, it declined by 5.74 per cent when compared with 59.44 per cent recorded in the corresponding half of 2019. “Capacity utilisation in the sector averaged 49.5 per cent in 2020 as against 56.8 per cent recorded in 2019.
“The uptick in capacity utilisation in the period is attributed to the relaxing of the COVID-19 containment measures, particularly the opening of the economy for business activities in the second half 2020.
“The increase was also seasonally influenced as a result of Christmas celebration boosted economic activities in the last quarter of the year,” the report added. Also, interest rate charged to manufacturers increased to 22 per cent in the 2nd half of 2020 from 20 per cent recorded in the corresponding half of 2019, the report stated.
The increase in the interest rate in the 2nd half of the year was adduced to the opening up of the economy for business after months of lockdown due to COVID-19 and the attendant increase in demand for investible fund by manufacturers in the period. “COVID-19 had a staggering devastation on global economies as evident in the huge death toll of manpower; the crashing of crude oil price, the slowing of global supply and demand; and the total halting of economic activities through the lockdown.
“At the moment, productivity in the sector is at the lowest and therefore require deliberately orchestrated action to rekindle significant productive activities in the sector.
“Based on the foregoing and with the intent to address the challenges of the sector, we recommend that manufacturers be granted concessional forex allocation at the official forex market for importation of productive inputs that are not locally available.
“We also want a downward review of the current increment in electricity tariff and the current increment in fuel pump-price. “Government must also construct a critical generational pricing model for the economy that will recognize changes in inflation, exchange rate, lending rate in the determination of wages to encourage consumption.
“We implore the Central Bank of Nigeria to intervene directly to ensure that manufacturers have access to funds, particularly the N1 trillion COVID-19 Stimulus Package.
“Manufacturers must also be sensitised on the current feasibility of the N220 billion Micro, Small and Medium Enterprises Development Fund and N300 billion Real Sector Support Facility and how they can be accessed,” it stated.