How are manufacturers dealing with energy, input challenges?
Nigerian manufacturers are increasingly devising new ways of dealing with old problems.
Rather continue to whine, real sector players are consistently developing new solutions to challenges that have clogged their wheel of progress for years.
In terms of energy, where 30 to 40 percent of their expenditure goes, large enterprises such as Dangote Group have resorted to the use of coal energy. The group started this initiative last year during the period of acute gas scarcity, which combined with foreign exchange crunch to bring down capacities of many factories.
Apart from this, manufacturers have formed Manufacturers Association of Nigeria Power Development Company (MPDC) and are now partnering with private power players to provide power supply to specific industrial clusters.
The MPDC has signed an agreement with several private sector power suppliers, including Tower Energy Solution & Systems Limited, which will oversee the supply of six to 10 megawatts (MW) of electricity to Henry Carr Industrial Cluster in Ikeja, Lagos.
MAN has also partnered with Negris Group for the supply of up to 80 MW of electricity to Odogunyan in Ikorodu industrial cluster.
It is equally working with ASB Valiant Company Limited for the provision of 80 megawatts (MW) of power to industries at the Lagos-Ibadan/ Makun corridor.
The organisation is also talking with solar power supply firms in the northern Nigeria, where there is limited gas supply to enable clusters in Kaduna, Kano and other parts of the north to have incremental power at cheaper rates. Similarly, a negotiation is on the pipeline with Sahara Energy, Geogrid LighTec Limited and other companies for the supply of power to industrial clusters, according to Ibrahim Usman, chairman of MAN Power Development Company Limited.
“Right now, manufacturers would rather pay a little extra and get quality power,” Usman said in Lagos.
“These cases work in Lagos because there is gas. If we are going to the north where there is no gas, we will be talking of solar, biomass, wind or hydro. It is a case by case basis because what is happening in Lagos may not necessarily be what we need in Uyo, Aba, Kano or Kaduna,” he said.
Electricity supply from power distribution companies (DisCos) worsened across the country in 2016 as manufacturers spent N129.95 billion on alternative energy sources within the year as against N58.82 billion recorded in 2015.
The 2016 figure represents 121 percent jump from that of 2015, data exclusively obtained from the Manufacturers Association of Nigeria (MAN) show.
In terms of inputs, manufacturers are expanding their backward integration projects to reduce dependence on dollar for foreign raw materials. This activity is mostly visible among players in the agro-allied industries.
Nigerian Breweries Plc, biggest brewer in the country, is partnering Psaltry International Limited for the supply of sorghum and cassava, two key inputs at the factory.
Guinness is also ramping up local raw materials sourcing.
FrieslandCampina WAMCO, producer of Peak Milk and Crown Milk, is also expanding local milking in Oyo State, having recently increased the number of milking plants to five in the state.
PZ Wilmar is also investing hugely in Cross River State to get crude palm oil for onward processing, sales and use for production of other products.
As dollar scarcity worsened in 2016, Nigerian manufacturers started retooling their factories by buying locally fabricated machines from the Federal Institute of Industrial Research Oshodi (FIIRO) and other organisations.
Retooling is a process of equipping a factory with new or adapted tools.
“Many local manufacturers are now changing their imported machinery and are coming to us to buy local equipment,” Dele Oyeku, director of extension and linkages at FIIRO, told Real Sector Watch during a factory tour of Interstreet Messenger Limited in Lagos late last year.
“Most of the machines used by manufacturers are fabricated abroad. They are not suitable for the Nigerian environment. The worst is that if you import a machine, you will need technical experts of the company from where you bought them to fly into the country if the machine develops a fault. So they fabricate the machines in such a way that you will keep depending on them when the equipment develops faults,” he said.
ODINAKA ANUDU