Power inconsistency forces manufacturers to resuscitate IPP project  

 Incessant power outages in industrial zones or clusters have forced the Manufacturers Association of Nigeria (MAN) to rejuvenate the independent power project (IPP) it abandoned few years ago.

MAN had conceived an IPP project long before 2012 to improve power supply in industrial clusters and cut down production costs. But it abandoned same when it was assured by the then National Electric Power Authority (NEPA) and later Power Holding Company of Nigeria (PHCN) that electricity supply would improve.

 

But this has not been so, as power supply to industrial clusters has become worse since the new electricity handlers, starting from generation to distribution companies, took over.

 

“MAN incorporated a company for that process at that particular time.  But we were advised that power was going to improve, so we ended the project,” said Frank Udemba Jacobs, president, MAN, in an interview with select journalists last Thursday in Lagos.

 

“Right now, we are resuscitating the project and very soon we will sign a memorandum of understanding (MoU) with foreign companies that will help in building it. And this will be mostly for our clusters, that is, areas where we have most of our companies,” Jacobs said.

 

He added that the body is looking at getting between 50 and 100 mega watts from the prospective IPP project.

 

Manufacturing clusters include Ikeja and Apapa (Lagos), Agbara/Ota/Abeokuta (Ogun) and Kano Bompai (Kano), among others.

 

Data show manufacturers in the country spend N73.12 million monthly on alternative sources of power. Generally, energy spend occupies 40 percent of production costs of local manufacturers. This stifles the production process, increases costs and reduces competitiveness of locally produced goods.

 

“This cost is burdensome and could lead, if not checked, to massive shake-up in existing factories. It could lead to hinder potential investment in the sector, especially as the majority of manufacturing companies are under the SME category,” Jacobs observed, during the interview, which also provided an opportunity for Sam Amadi, Nigerian Electricity Regulatory Commission (NERC), to address manufacturers on the power situation.

 

According to MAN president, manufacturers in the country have always expressed disapproval with high electricity fixed charges and rates heaped on them in categorizations such as D1, D2 and D3, as contained in Multi Year Tariff Order (MYTO) 2.1.

 

“Regrettably, this led some of our members in the steel sub-sector to take legal action against NERC and discos on the contentious issue of implementation of MYTO 2.1 while MYTO 2.0 is still subsisting.

 

Responding, Sam Amadi admitted that Nigeria has a challenge with electricity supply, stressing that the problems with the sector are three-fold: supply, metering and tariff.

 

According to Amadi, the supply problem is majorly caused by inability to supply gas, unattractiveness of the gas market to investors owing to un-economically viable price as well as legacy of debts owed gas suppliers by distribution companies.

 

“In the area of supply, there are majorly the problems of poor gas price, lack of credit worthiness, as no bank is now willing to lend loans to the power sector, as well as the problem of linkage between gas and power,” Amadi said.

 

Amadi said the labour union struggles which ramped up salaries of workers contributed to the problem in the sector as personnel costs of the discos have risen significantly.

 

“Abuja disco used to pay workers about N450 million but they now pay N750 million. They said they do not have money again and are no longer credit worthy,” he said.

 

Amadi said the NERC had told electricity managers that if they were not ready to meter consumers, then they should not charge beyond a certain amount, adding that the commission recently mandated Abuja disco to refund N300 million which it overcharged consumers, a directive that was followed.

 

He said the discos will start consultations and interactions with consumers, with a view to improving supply and removing impediments to electricity.

 

“We have said fixed charge should be pro rata. This means if you are not consuming, you are not paying. We now want a situation where tariff will be determined by costs in each locality. This means that charges may differ from place to place. If we have privatized the power sector, the investors will also recover their money,” he said, while suggesting the micro grid platform for manufacturers, which would enable clusters to have sufficient power supply and even sell to other consumers.