Manufacturers’ investment in alternative energy sources during the first half of 2023 decreased by 21.1%, totalling N60.47 billion, in contrast to the N76.70 billion spent in the second half of 2022.
This also marked a 10.8% decline from the N67.8 billion spent during the same period in 2022.
The Manufacturers Association of Nigeria (MAN) unveiled these statistics in its ‘Economic Review for the First Half of 2023’ (January – June).
This report provides a concise overview of the survey conducted by MAN in the manufacturing sector during the first half of 2023.
The survey was crafted to track fluctuations in performance indicators within the manufacturing sector, examining how they correlate with the broader macroeconomic and policy landscape during the survey period.
The focus manufacturing indicators include capacity utilization, production value, inventory, level of utilization of local raw materials, investment, expenditure on alternative energy sources, etc.
MAN said that the electricity supply to industries from the national grid during the first half of 2023 experienced a marginal increase, with a daily average of 11.3 hours, compared to 10.2 hours in the corresponding period of 2022.
In addition, there was a 42-minute extension in electricity availability compared to the 10.6-hour daily average observed in the latter part of 2022. Correspondingly, the average daily number of outages saw a minor uptick, rising from 4.4 times in the first half of 2022 to 4.7 times.
The report read partly,
- “In the same vein, the average number of outages per day increased marginally to 4.7 times from 4.4 times in the first half of 2022.
- “Consequently, expenditure on alternative energy sources declined to N60.4bn in the first half of 2023 from N76.7bn recorded in the second half of 2022, thus indicating an N16.2bn or 21.2 per cent decrease in the period. It also declined by N7.3bn or 10.8 per cent from the
- N67.8bn recorded in the same period of 2022.”
Effects of Surge in Diesel Price
The rise in spending on alternative energy sources was directly tied to the escalating diesel prices, which had taken a toll on the production capabilities of numerous manufacturing companies.
Moreover, Oil marketers have attributed the surge in diesel prices to the foreign exchange crisis in the country and the recent introduction of a 7.5 per cent Value Added Tax on Automotive Gas Oil, commonly known as diesel.
As a result, in several states, the cost of diesel has risen to a range of N900 to N950 per litre.
Local manufacturers claimed that the development may lead to the closure of some factories and job losses.
Meanwhile, the Federal Government announced yesterday that they will be removing VAT on diesel prices for the next six months as part of their agreement with organized labour to cushion the effect of subsidy removal.
This new development is forecasted to cause a decline in the price of diesel in the coming weeks as well as reduce the operating cost of energy among manufacturers.
More Insights
MAN, further decried that at 24 per cent, the cost of funds to manufacturers, undoubtedly, was one of the major hurdles confronting the manufacturing sector in the country.
The Director General of MAN, Segun Ajayi-Kadir, said the challenge of the high cost of obtaining funds was substantiated by data gathered during the fieldwork for the first half of the 2023 report.
- “According to this data, the average lending rate to the manufacturing sector from commercial banks remained high at 24 per cent when compared with what was recorded in the corresponding half of 2022,
- “The lending rates offered by commercial banks to industries are significantly influenced by the continuous upward adjustments in the Monetary Policy Rate.
“These adjustments aim to maintain a favourable real interest rate environment, to attract foreign investment inflow, defend the domestic currency (Naira), and curb the spiralling inflation, the MAN DG stated.
- “However, businesses and foreign investors are increasingly wary of committing capital, thereby hindering economic growth and prospects for recovery.
- “The combined effect of these is the resultant higher inflationary pressure, which fuels cost of production, reducing consumers’ purchasing power and having a greater impact on the manufacturers,” Ajayi-Kadir said.
