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OPS: Energy costs eroding private sectors’ profitabilityelectricity

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Nigeria is a very challenging place to run a successful business without constant power supply and energy

 

Private sector operators have again raised the alarm that huge energy costs in the course of production is fast eating up their profitability amid macro-economic challenges in the country.

In particular, Eat’N’Go Africa, a leading quick-service restaurant and the parent franchisee to Domino’s Pizza, Cold Stone Creamery and Pinkberry Gourmet Frozen Yoghurt, revealed that diesel spending in the course of running its outlets across the country this year (2022) alone wqs already about N2 billion.

In addition, Mouka, the leading bedding and mattress making company, has also disclosed that arbitrary price and constant changes in the prices of diesel in the country since the beginning of the year had massively impacted negatively on its mattresses production in all ramifications.

In fact, New Telegraph’s investigations showed that energy cost on power supply this year alone by manufacturing firms, especially on diesel, is expected to take a toll on many local firms’ revenue generation and bottom lines.

Speaking with New Telegraph in Lagos, the Group Chief Executive Officer, Eat’N’Go Africa, Mr Patrick McMichael, said that Nigeria was a very challenging place to run a successful business outfit, saying number one belief for private sector operator’s success in Nigeria is power,  profitabilityelectricity and constant supply of energy.

McMichael explained that the biggest challenge Eat’N’Go Africa as a group was facing currently in Nigeria is power and the cost to generate prompt electricity to run its outlets nationwide.

According to him, increased power cost spending this year alone is about N2 billion out of its profitability in diesel purchase.

McMichael said: “Number one belief for Nigeria for private sector success is power and electricity. So, it is constant power supply is what this country needs first and foremost and everything else will follow after that.

“That’s just my view. It is the challenge that we have in our business today and also challenging time for the group. Our biggest challenge now for the group is power and the cost to generate the powers to run these stores, and when talking about the increased power challenge that we face this year, it’s taking about N2 billion out of our profitability just this year alone in powering diesel.

“But it is not only applying to us alone but to every single company and that is just the direct cost and this touches everything and so, every single part of our inputs and our supply chain is affected by the cost of oil, transport, to production and seems everything. So, the most important part of the pulse of running business in Nigeria is power.”

In his submission, the Managing Director, Mouka, Mr. Femi Fapohunda, told New Telegraph in a chat that the high cost of purchasing diesel by manufacturing firms operating in the country was a cause for concern for production in the country since it is resulting to hyper inflation and high cost in  the prices of goods.

 

Fapohunda said: “Am sure everybody knows the cost of diesel about three months ago from about N250 per litre to now about N800 to N900 per litre depending on who you know and you are talking to, to supply you.

“It is challenging for everyone in the country especially manufacturing firms. But luckily as I said, Mouka has been building into the future even before now.

“Before now, we have started having our original presence by having depots. We now have now about 8 depots around the country which means our logistics does not have to be just picking about 5 mattresses or two mattresses, you can actually pick a whole lot like cluster at any point in time so that we can manage the cost of logistics.

“That is one. Another thing we have also looked at in some of our areas where possible we have started converting into so  lar energy. Most of our security lights, the lights in our head office and others are now being converted into solar or solar-powered energy. And also, not because of energy usage but, it also control our emission, so we tried as much as possible to reducing the consumption of diesel, is one of those things I mentioned on daily basis.

“Some of our or most of our air-conditioners and co are actually converted and are actually using inverters so, it’s consume less energy. “Asides all this, part of what we have been also able to do is to restructure our production efficiency in such away that you actually utilise bigger generator at a different power at a different time and particular time of the day. “

 

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