It is no secret that energy costs, especially alternative energy, make up almost 70 per cent of manufacturers’ total production costs in Nigeria today. Looking at how to significantly address the challenges, experts are advocating cleaner production methods and better industrial energy efficiency as cost-saving options, TOBI AWODIPE writes.
Generating energy for production is one of the major components of any sector, and particularly the real sector, as power is required not only to produce goods but also for their movement and storage.
Over the years and more so in recent times, the need for alternative energy, which includes diesel, gas and generator, has risen sharply due to very poor public electricity supply and so have their costs, all of which have significantly eroded profit margins for real sector players and contributed to impacting the environment significantly.
In this vein, some industry experts have argued that a 30 per cent reduction in production costs can be achieved through energy efficiency via cleaner production processes and renewable energy. They say embracing renewable energy and cleaner production methods will not only reduce energy use costs but also impact alternative energy and generally improve productivity.
Advocating for environment-friendly manufacturing, the
National Programme Coordinator, Environment and Energy, UNIDO Regional Office Hub, Oluyomi Banjo, pointed out that globally, industries account for one-third of total energy consumption and almost 40 per cent of worldwide CO2 emissions. According to him, the International Energy Agency (IEA) has emphasised that industries will need to reduce their current direct emissions globally by about 24 per cent in comparison to 2007 levels.
Speaking at the GEF-UNIDO Industrial Energy Efficiency (IEE) and Resource Efficiency and Cleaner Production (RECP) policy dialogue session for private sector CEOs and heads of ministries, departments and agencies (MDAs), held in Lagos, he stressed that Nigeria is a lower-middle-income country with a GDP of $472.64 billion and GDP per capita of $2,162.
“Nigeria’s economy is heavily reliant on fossil fuels and petroleum represents a huge percentage of its total export revenue. Despite the importance of energy to the country’s economy, low access to modern energy services remains one of the principal constraints to Nigeria’s economic development. It is also important to note that Nigeria has one of the highest energy poverty rates in the world, about 47 per cent of its population does not have access to grid electricity and those who do have access, face regular power cuts. The economic impact of unreliable grid operations is estimated to be around $28 billion.
Lack of reliable access to electricity is also one of the major constraints to the private sector according to the 2020 Doing Business Report of World Bank. Therefore, improving power sector performance, particularly in the non-oil sector, will be crucial to foster economic growth,” he said.
Banjo added that the need to reduce energy consumption, environmental degradation and resource depletion by industries in emerging economies like Nigeria is especially evident since global growth in industrial production since 1990 has been dominated by emerging economies like India and China, both of which accounted for over 80 per cent of increased industrial production during this period.
He revealed that the project was collectively developed and submitted by UNIDO on behalf of Nigeria in 2017 under the Global Environment Facility (GEF) 6 programming cycle.
“It was approved for full project development in 2017 and subsequently approved for full project implementation in 2020. For the first time at UNIDO, we are having an integrated IEE and RECP in one project. In South Africa, UNIDO’s project on Industrial Energy Efficiency recently received the best project of the year by the Southern Africa Energy Efficiency Confederation. We look forward to replicating records like this in Nigeria,” he said.
He added that the project’s outcome is targeted at local industries to develop an expert base for Nigeria which could also be exported to other countries in Africa and beyond.
“The project will address to a good extent, the questions on how industries can improve efficiency, profitability, operate at international best standards, comply with regulations and maintain improved relationships with policymakers.
“A pilot financing RECP-IEE scheme has been executed through the Bank of Industry (BoI) and issues around ISO 50000 and 14001 are executed through the Standards Organisation of Nigeria (SON). We hope to support, nothing less than 75 industries across five sectors: food and beverage, wood and furniture, steel and metals, textiles and garment and petrochemicals. We will develop the capacity of the organised private sector (OPS) and develop not less than 300 Nigerian RECP-IEE experts.”
He added that this project is in line with their other activities, tailored towards developing industrial policies that are resource-efficient as well as protective of the natural environment and human health.
“The Nigeria country programme will run from 2018 to 2022 and the environment and energy are two distinct components of this programme. We have implemented Industrial Energy Efficiency in over 18 countries around the world and implemented Resource Efficiency and Cleaner Production in over 60 countries.
“This will create an opportunity to develop the IEE and RECP methodologies, and human capacity building which will also see Nigerians being trained to a global standard as Energy Assessors and RECP experts. We are hoping that this will eventually lead to the creation of National Cleaner Production Centres in the country, which will also promote the circular economy,” he said.
Pleading with heads of private sector organisations and the MDAs to support the project, he reminded them that they are the beneficiaries and drivers of environmental, economic and social growth.
President of the Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye, was represented by VP, Lagos Zone, Prince Felix Oba Okojie hailed UNIDO for what he described as concerted efforts aimed at repositioning the manufacturing sector in Nigeria for sustained growth through the adoption of leading global practices and methodologies. Adding that the project’s implementation marks the beginning of a defining moment in their journey towards sustainability, he said it represents an essential moment for them as leaders in the manufacturing sector, “where we have the opportunity to champion sustainable practices that not only drive growth but also preserve our planet for generations to come.”
He revealed that the challenges posed by energy inefficiency are multifaceted, encompassing not just economic considerations but also environmental impacts and social implications. However, he said, embedded within these challenges are opportunities to innovate, optimise, efficiently utilise resources and lead the way towards a more sustainable future.
“As we embrace the principles of energy efficiency, we will not only be reducing our carbon footprints, but we shall also be mitigating environmental degradation and saving energy costs. In return, the efficiency, competitiveness and resilience of our operations will be enhanced to meet the increasing demands of our ever-evolving global marketplace. I believe we can safeguard our environment and foster sustained economic growth and development in Nigeria by adopting cleaner production methods, optimising resource utilisation and investing in energy-efficient technologies.”
Also advocating for the speedy adoption of the IEE & RECP methodologies in respective industries, he said it would help in their quest to promote environment-friendly manufacturing.
Director, Special Purpose Vehicle of MAN, Ambrose Oruche, shed some light on some of the challenges manufacturers face and why it may be tough for industrialists to embrace cleaner energy. He said gas was presented as a better alternative to diesel and along the line, many manufacturers embraced it as it was cheaper, cleaner and more efficient. He said that has changed now as the cost of gas is now more than diesel, forcing many producers to revert to diesel generators for production, in a bid to cut costs. “Gas, which is a cleaner alternative to diesel, is priced in dollars instead of Naira and the cost quoted to industries is way higher than even export prices. This is not sustainable for any producer and manufacturers should be re-classified as energy producing rather than placed under energy consumption, which is what is obtainable now. Manufacturers should be given the same price (for gas) that is being given to the GenCos.”
“Also, the cost of adapting to renewable energy is very expensive. The initial cost outlay for adopting renewable energy is very high and many industrialists cannot afford it. However, if the price can be reduced significantly or banks like BoI can come in with some form of funding for industries that want to adopt renewable energy, it will help get many people on board. I must stress here that the funding must be at single-digit, anything more than that is pointless,” he said.
