More manufacturers go off-grid to reduce production cost
Notwithstanding a steady expansion across both manufacturing and non-manufacturing sectors as revealed by the latest Purchasing Managers’ Index (PMI), more manufacturers are expected to go off-grid as part of measures to reduce production costs and enhance competitiveness.
The Manufacturers Association of Nigeria (MAN) is hoping to increase the number of its members on its own Independent Power Project (IPP) scheme in Makun industrial cluster on the Lagos/Ibadan corridor before the end of 2017.
It hopes to use the Manufacturers Power Development Company (MPDC), as a vehicle to achieve the gradual transition from dependence on distribution companies for electricity to its IPP.
Already, it is expected to seal the Power Purchase Agreement (PPA) with ASB Valiant Company this month, to ensure that there is a smooth transition to alternative power solution as well as ensure that its members’ electricity needs are met.
The Chairman, Economic Policy Committee, MAN, Reginald Odiah, explained that the partnership will see ASB supply reliable power to manufacturing outfits along the Lagos/Ibadan corridor on agreed terms. He maintained that this would go a long way to cut down undue expenditure and the extra cost in providing alternative means for power generation incurred by manufacturers in the country.
According to him, this is the time to break the monopoly of the power generation and distribution in the country, as MAN is engaging several stakeholders to achieve this objective.
Odiah during a breakfast meeting with stakeholders in the manufacturing industry, said: “Currently, about 40 per cent of our production costs go into energy provision and this is not healthy for businesses, especially when we have to compete with imported products. Therefore, everything we can, we must do to ensure that we bring our cost down and one of them is the power situation.”
The Chairman, Board of Directors (MPDC), Ibrahim Usman, who was represented by Otunba Francis Meshioye, explained that the move became important as production cost continues to erode many firms’ profitability.
The Managing Director of ASB Valiant Company, Ayodele Ikumapayi, explained that his firm was proposing a tri-fuel capacity power plant to address the needs in the industrial sector, adding that the tariff component is expected to provide more value to subscribers of the scheme as against what they currently have.
He noted that his firm already has the consent of the distribution company along the Lagos/Ibadan corridor to proceed with the project, even as an audit of power demand has been concluded.
To this end, he said the company will be providing infrastructure to meet the potential energy demand of at least 80megawatts MW within the region once guaranteed off-takers key into the project.
“For MAN to partner with us to meet the demand of their members, it makes it easier for cost effectiveness and sustainability to be achieved. The consideration under this project is to ensure that there is an improved price from the $7.50 currently being paid by gas users. We will be selling in Naira to avoid challenges that was encountered with franchisers,” he added.
The Director General of MAN, Segun Kadir, said the move by the association is to ensure that members’ concern in the area of power is addressed in a sustainable manner, especially in the area of availability and pricing.
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