Power supply: Huge challenge for SMEs

Poor power supply has continued to play a negative role in Nigeria’s economic development.

This is more pronounced in the micro, small and medium enterprise (MSME) sector, where erratic power supply causes untold hardship, ranging from reduction in profitability to loss of revenue and crash in output.

Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN), told Start-Up Digest recently that erratic or poor power supply remains the biggest challenges facing manufacturers, especially SMEs.

Jacobs said MAN has already floated an electricity company to help reduce the negative consequences of this situation.

Most SMEs have been finding it very difficult to cope with the inadequate power supply, while some that are not lucky to get power supply have closed shop.

Most large-scale enterprises have the capacity to navigate through the situation by getting a gas plant or coal-fired plant to support electricity supply, but many MSMEs either use generators with diesel or fuel.

Many MSMEs can hardly cope with the increase in cost of fuel, with energy accounting for up to 40 percent of overhead.

The Economist in its recent report on Nigerian SMEs says that Jason Njoku of IROKO partners, spent $100,000 on power-generating equipment, including installing a transformer at a cost of around $30,000-$40,000.

Apart from transmission, power generation and distribution are in the hands of the private sector. But electricity is yet to significantly improve, owing to lack of funds by the investors, pipeline destruction, among many others.

“It would have been better if I had not paid for power. Why should I pay some huge amount of money and not getting what I paid for?”asked  John Ide, an electrical engineer in Lagos .

The inadequacy of electricity supply has a direct impact on these small medium enterprises, leading to low rate of wages, unemployment, low profit, capital.

Experts say the current power situation would continue to hamper Nigeria’s ambition of diversifying or expanding the economy, unless something is urgently done.

“How can anyone diversify the economy without MSMEs, which make up almost 90 percent of businesses in the country?” asked Charles Idemba, an Abuja-based entrepreneur.

“MSMEs create jobs more than large businesses. If there is a problem with them, then the entire economy will not survive,” Idemba said.

ANGEL JAMES