Manufacturers worry as alternative energy costs spike to N67.7b in H1
Local producers in the country have continued to groan under rising operational expenses; especially those triggered by scarce and fluctuating foreign exchange rates and higher energy prices.
Indeed, the Manufacturers Association of Nigeria (MAN) urged the federal government and monetary authorities to address the foreign exchange and energy crises responsible for the unfavourable movements in manufacturing indicators
Director-General of MAN, Segun Ajayi-Kadir, made the call at the Commerce and Industry Correspondent Association of Nigeria (CICAN) workshop and recognition of individuals and firms themed: “Manufacturing: Despite FX and Energy Crisis.”
He specifically noted that manufacturers in Nigeria saw their expenses on alternative energy sources (diesel and gas) rise by 50.6 percent in the first half of this year compared to the same period last year.
They spent N67.7 billion on alternative energy sources in H1 2022, up from N45.0 billion in the same period last year, even as the MAN boss noted that the increase in cost of energy pushed up global inflation, which affected the cost of importation across the world, including Nigeria.
Ajayi-Kadir said that the frontline challenges of inadequate foreign exchange and energy crisis dipped the manufacturing growth output from 5.8 per cent in the first quarter of 2022 to 3.0 per cent in the second quarter
He said these challenges massively affected manufacturers that were already confronted by inclement operating environment, compounded by the COVID-19 pandemic and the current Russian-Ukrainian war
According to him, manufacturing indicators such as capacity utilisation, contribution to real Gross Domestic Product (GDP) investment, employment, cost of production, competitiveness among others were also negatively impacted
He added that with the limited foreign exchange inflow from crude oil sales, foreign exchange demand pushed over the bounds of supply and contributed to the depreciation in Naira value
The MAN DG stressed that the challenges must be adequately addressed to arrest further degeneration in the performance of the sector.
“In doing that, we consider the following measures critical such as the allocation of a significant proportion of available foreign exchange to the productive sector, particularly manufacturing.
“Further investment in the electricity value chain must be carried out and the government must commit to adding 10,000 MW to the current electricity distributed in the country.
“Also, we must embrace and support significant development of renewable energy mix as the country has huge potentials for solar and wind,” he said.
Ajayi-Kadir added that the scope of road infrastructure should be expanded and the tax credit scheme developed and refurbished.