The lack of constant power supply in Nigeria has eroded N350 billion from the profitability of Nigeria’s leading manufacturing companies.
In 2022, Nigeria’s leading cement companies, Dangote, BUA, and Elephant (parent company of Lafarge), spent a staggering N350 billion on fuel due to the nation’s epileptic power.
This amount spent on fuel represents 33.71% of the total cost of sales, which amounted to N1.038 trillion for the cement firms during the period analyzed. Notably, the three cement giants expended N278.077 billion on fuel in 2021, indicating a 25.83% increase between both years.
Investors King understands that cement manufacturers in Nigeria generate their own power due to inconsistency of the national power grid despite billions spent on it over the years.
Nigeria’s power generation often hovers around 4,500 and 3,500 megawatts while sometimes dropping below 2,000 megawatts. This is grossly inadequate to serve a population of more than 200 million people.
In most cases and very often in 2022, Nigerian power generation could suffer partial or total collapse, leading to a nationwide blackout. This is despite the humongous sum of money that has been pumped into the sector.
It would be recalled that the Federal Government and Siemens signed a multi-billion dollar deal to increase Nigeria’s power generation to 11000 megawatts I’m 2023 and 25,000 megawatts by 2025.
According to the federal government, Nigeria is expected to save $1 billion annually after the completion of the project.
However, the deal which was signed in 2020 has not witnessed any reasonable progress.
In addition to the power supply challenges, the cement manufacturers also face other cost pressures impacting their profitability.
These include the depreciation of the Naira and macroeconomic inflationary pressure, particularly in the domestic market, where average inflation has heightened.
According to the National Bureau of Statistics, Nigeria’s annual inflation rate reached 21.82% in January 2023, the highest since September 2005, driven by soaring food prices and a weaker Naira currency.