Manufacturers in Nigeria have seen a significant reduction in their spending on alternative energy sources, with a decline of 21.1% to N60.47 billion during the first half of 2023 compared to N76.70 billion in the second half of 2022. This marks a decrease of N7.33 billion or 10.8% from the N67.8 billion recorded in the same period in 2022, as reported by the Manufacturers Association of Nigeria (MAN) in its ‘Half-Yearly Review of the Economy (January – June 2023).’
The report summarizes the findings of MAN’s survey of the manufacturing sector’s performance during the first half of 2023, focusing on various indicators such as capacity utilization, production value, inventory, utilization of local raw materials, investment, and expenditure on alternative energy sources.
MAN noted that electricity supply to industries from the national grid increased slightly to an average of 11.3 hours per day in the first half of 2023, up from 10.2 hours in the same period of 2022. This also represented a 42-minute increase compared to the average of 10.6 hours per day in the last half of 2022. However, the average number of power outages per day also rose marginally to 4.7 times from 4.4 times in the first half of 2022.
Despite these improvements, MAN expressed concern about the high cost of funds for manufacturers, which stood at 24%. The Director-General of MAN, Segun Ajayi-Kadir, highlighted that this challenge was substantiated by data collected during the first half of 2023.
Ajayi-Kadir pointed out that the lending rates offered by commercial banks to industries were influenced by continuous upward adjustments in the Monetary Policy Rate, aimed at maintaining a favorable real interest rate environment and curbing inflation.
The report also discussed the impact of the Naira redesign policy by the Central Bank, which initially caused a Naira crunch and slowed economic activities. It further addressed the effects of subsidy removal and exchange rate unification, which left the economy uncertain, eroding investor confidence and contributing to higher inflation.
Ajayi-Kadir stressed the importance of promptly addressing these challenges identified by manufacturers to restore the sector’s growth trajectory. He recommended measures such as credit guarantees for industrial loans, creating favorable conditions for Small and Medium Enterprises (SMEs), strengthening development funding institutions like the Bank of Industry (BoI) and Bank of Agriculture (BoA), and improving access to the CBN’s non-oil export stimulation facility.
To address the electricity supply challenge, he called for the development of a roadmap for improved power supply, including off-grid solutions and private sector-driven independent power projects. Additionally, he suggested promoting renewable energy sources, reviving national refineries for local fuel production, and reviewing domestic gas pricing.
