With gas suppliers on one hand and Generating Companies (GenCos) on another threatening to withdraw their services over one reason or the other, businesses are now left between the devil and the deep blue sea as they strive to survive in the face of constant power outages; BENJAMIN UMUTEME reports.
On that fateful Friday morning of September 2019, Mrs. Chibuzor Ikechukwu had just bought two cartons of iced fish from the cold room in Jikwoyi, in anticipation of making brisk business that weekend. But it was not to be as not quite 30 minutes after there was power outage.
Two hours later, she was still hopeful that the ‘light’ would be restored. By 3:00pm on that fateful Friday hope had turned to despair as her deep freezer was with the technician while she did not trust the only cooler she had.
By Saturday morning, the ‘light’ was still not restored, it dawned on her that she would eventually run at a loss. At the end of the day she was left with no other choice than to roast a carton and half of the two cartons.
“When I went to buy the fish I had my doubt whether the lights would remain knowing it had always not been steady. But as a business person I was hopeful that it would allow me to make the weekend sales.
“This is not the first time that I suffered this kind of loss due to epileptic power supply. But this one is painful because I had just stocked my store with goods and I had to collect money from a neighbour,” she said.
Mrs. Ikechukwu’s situation aptly captures the plight of many businesses who daily run at a loss due to lack of constant power supply.
Privatising the power sector
In 2012, the Power Holding Company of Nigeria (PHCN) was handed over to private sector players to manage as a result of the outcry over government’s inability to deliver steady electric power to Nigerians. PHCN was broken down into distribution and generating companies with the government still retaining about 40 per cent holding in the power companies.
The implication analysts say, the private sector which has majority say in the companies are not able to carry out far reaching reforms that they would love to.
For public affairs analyst, Mohammed Musa Goni, the power sector continues to witness its pre-privatisation challenges because investors lack the capital to fund adequate fund the sector.
“Adequate power supply is an unavoidable prerequisite to any nation’s development, and electricity generation, transmission and distribution are capital-intensive activities requiring huge resources of both funds and capacity. In the prevailing circumstances in Nigeria where funds availability is progressively dwindling, creative and innovative solutions are necessary top address the power supply problem,” he said.
As a result of the power challenge, many big companies relocated or closed business include Dunlop Nigeria Plc., Coca Cola, Michelin, Cadbury Nigeria Plc., Unilever, Patterson Zochonis (PZ), Guinness Nigeria Plc., among others. And many more continue to struggle to make any impact in the country’s harsh business environment.
The gas-to-power challenge
As it presently stands, gas is the logical choice for power generation in Nigeria, both in terms of gas availability and capital requirements.
In trying to address the challenges to powering the power plants would pose, the administration of former president Goodluck Jonathan signed an agreement with the World Bank and gas suppliers. But alas, that has failed to yield the desired result as both GenCos and DisCos continue to lament the non availability of gas that is needed to power the plants.
Despite the agreement, gas supply and pricing continue to hinder the availability of new gas-fired power stations to generate electricity in sufficient quantities.
The pricing of gas is a major issue in Nigeria and is very central to electricity generation, availability and retail prices. About one half of the current generation mix in Nigeria is thermal and this proportion is set to go up with a limitation on utilisation of hydro capacity (further exploitation of hydro resources is difficult due to capital barriers, even though the government has plans that are still at a conceptual stage, to develop large hydro facility at Mambilla in the North).
Contracts & payment security
A number of vesting contracts are yet to be finalised and signed. These include supply guarantees which need to be established. The payment guarantees to be provided by vesting contracts / PPAs are not clear and are open to different interpretations.
Implication to businesses
In Nigeria, getting access to constant power supply is a major concern for business. As of June 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 is now a joke that nine out of every ten household 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 businesses 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) states 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.”
