High energy prices are threatening the survival of manufacturers, raising their production costs and cutting down margins. This is amid reported price decline of diesel.
“Gas prices are very high in Nigeria. Gas is still priced at $8 per standard cubic foot (scf), $5 higher than the global price. With the current exchange rate, you find that we pay almost for N4,000 per scf, which is equivalent to one litre,” said Micheal Ola Adebayo, chairman of Gas Users Group of the Manufacturers Association of Nigeria (MAN).
“This is not helping us,” Adebayo added.
A tour of Fidson Healthcare’s ultramodern plant at Sango-Otta in July showed that the factory could not take off owing to scarcity of gas.
During acute gas shortages in the second and third quarter of 2016, cement and steel makers resorted to the use of the costly low-pour fuel oil (LPFO), which hit their margins badly.
Small and medium manufacturers now have to pay up to N175 for a litre of diesel and N145 for that of fuel.
“This is why it is important to review our energy policy so as to bring down production costs,” said Muda Yusuf, director-general of Lagos Chamber of Commerce and Industry (LCCI).
Nigerian manufacturers spent N59 billion on alternative power sources such as gas, diesel, fuel, and inverters in 2015, as against N25 billion spent in 2014. Forty percent of expenditure in the manufacturing sector goes to alternative energy sources.