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    Adequate Power Infrastructure Imperative For SMEs Growth

    January 24, 2022 - Leadership


      The cost of production and manufacturing in the real sector have become increasingly high for many companies and manufacturing industries due to the morbid state of power infrastructure, high tariff cost and low purchasing power of consumers in the country as overhead cost of doing business continues to surge in astronomical proportions, eroding marginal profits and working capital.

      The combined effect is colossal such that the sector cannot grow amidst the grappling power infrastructure and economic constraints in the country.

      Largely, the kind of funds Small Medium Scale Enterprise (SMEs) spend on power generation every month is enormous and depleting their working capital such that the overhead cost threatens business operations.

      Without doubt, the infrastructural deficiency in the power sector and lack of access to finance including forex constraints have eroded investors' confidence and further shrunk manufacturing output in the production value chain.

      Experts:' Reactions

      Addressing the issue, national president, Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola, said the worsening economic situation in the country has led to the closure of more businesses because many operators had suffered persistent loss as a result of the tough economic situation.

      Egbesola hinted that the growth of the manufacturing sector is threatened by the failing power infrastructure, adding that, businesses are folding up daily as a result of the disruptions affecting the industrial sector.

      Egbesola revealed that the manufacturing sector is threatened by forces beyond its control from the inflationary pressures, electricity tariff cost, supply gaps, unavailability of raw materials, forex constraints and poor research methodology to facilitate trade and investments.

      'The cost of production is extremely too expensive. Electricity, petrol and diesel had made manufacturing extremely expensive and products becomes less competitive. The aftermath of this portends job loss, shrinking production base as more factories metamorphosed into a dead situation and this give rise to more unemployment, shrinking productions and inflation of goods. Government is budgeting billions to fight banditry, crime, insecurity, but we are encouraging a dead situation for our operating environment where crime would thrive. It becomes a malady.'

      Similarly, the managing director of Cowry Asset Management, Johnson Chukwu, said there is a yearning need to invest in the power infrastructure in the county's economic hub to capitalize stronger economic activities and improve the capacity of the economy to increase efficiency and productivity in critical sectors of the economy.

      He expressed confidence that investments in the power sector would reduce the cost of doing business in the country by ensuring that government eliminates expenditures that is hampering critical sectors of the economy, especially the domestic refinery because they are not supporting activities to produce without encumbrance.

      'The energy infrastructure as one of the critical and starting point for the Central Bank of Nigeria (CBN) to take away subsidy on petroleum products. We will continue to see marginal improvement in the economy, but it's not going to be strong enough. We will continue to see post economic growth, at the end of the year, and once you see that economic growth is below population growth rate, you will observe that the level of poverty in the country will continue to increase and growth per capita will be lower. There is weak portfolio investment, inflation, unemployment, FX constraints, unavailability of raw materials and a limited number of petroleum Investment in the country,' he stressed.

      Special assistant on Energy to Godwin Emefiele, Governor of Central Bank, Ebipere Clark disclosed that, until Nigeria addresses the tarriff issues in the power sector, no serious investor would finance any infrastructure in the power sector.

      'There is a major disconnect between collections and distribution, leading to serious shortfalls. If you want investors to invest in the power sector, they would need some level of confidence that they would get their money back.

      'Right now, we don't have a system that gives that guarantee to investors. Government no doubt has limited financial capacity to address infrastructure issues in the power sector. It is fiscally stranded to address major electricity infrastructure. So, there is a need to create environment for private players to participate actively in driving the sector to a sustainable level. Investors need confidence on capital and return on investment,' he noted.


      On his part, managing director, Nigeria Bulk Electricity Trading, Dr. Nnaemeka Ewelukwa, remarked that besides closing the metering gap in the distribution segment, implementing the Siemens Presidency power initiatives would lead to accountability in the sector.

      'To get more funds into the sector, closing the metering gap in the country would enable a clear visibility of every funds inflow in the electricity market. Energy transition fund is the bigger picture facing the country in view of the global net zero. There is a massive gap between the generation capacity in the country and what is currently supplied to the citizens, so the generating capacity is under 13,000 Megawatts to 14, 000 Megawatts. But if you look at what is available it is about 6000 to 7000 Megawatts according to data from TCN. But on a given day what comes to the citizens is about 4500 Megawatts,'


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