Manufacturers Cut Spending on Alternative Energy Sources as Electricity Supply Improves

Nigerian manufacturers reduced their spending on alternative energy sources by 21.25% to N60.4 billion in the first half of 2023, according to the Manufacturers Association of Nigeria (MAN).

This decline is attributed to the increased availability of electricity from the national grid, which improved to 11.3 hours per day, up from 10.2 hours in the same period of 2022.

The report also indicated a slight increase in daily power outages to 4.7 times from 4.4 times in H1 2022.

These improvements in grid electricity availability have positively impacted the manufacturing sector’s energy expenditure, leading to a significant drop from N76.7 billion spent in the second half of 2022.

However, the initial high expenditure on alternative energy sources was driven by skyrocketing diesel prices.

The cost of diesel had surged due to foreign exchange challenges and the implementation of a 7.5% Value Added Tax on Automotive Gas Oil (diesel).

Diesel prices in many states had risen to between N900 and N950 per liter, which threatened the production capacity of numerous manufacturing entities.

The Nigerian Textile Manufacturers Association expressed concerns about the potential closure of textile factories and job losses due to rising energy costs. Textile manufacturers, in particular, found it challenging to afford diesel at such prices.

The Chief Executive Officer of Coleman Technical Industries Limited also highlighted the increased production costs associated with higher diesel prices.

While the improvement in electricity supply is a positive development for manufacturers, the industry remains vigilant about energy costs and their impact on production.