By Milcah Tanimu
The escalating costs of energy are squeezing major companies in Nigeria, with expenditures on power generation and utilization reaching N635.2 billion in 2023. This marks a substantial 41.5% year-on-year increase from N448.76 billion spent in the corresponding period of 2022.
Diesel and related expenses for independent power generation constitute the bulk of the expenditure. The National Bureau of Statistics reported a 37.76% increase in the average retail price of Automotive Gas Oil (Diesel) from December 2022 to December 2023. Additionally, the removal of fuel subsidies by President Bola Tinubu resulted in a 225.85% rise in the average retail price of Premium Motor Spirit (Petrol) during the same period.
Companies across various sectors, including manufacturing and services, such as BUA Foods, Dangote Cement, Fidelity Bank, and Transcorp, reported sharp increases in power costs. Livestock Feeds recorded the highest rise at 104%, followed by BUA Foods with a 50% increase and Dangote Cement at 49.8%.
Business leaders and experts attribute the surge in energy costs to the persistent hikes in petroleum product prices, coupled with unreliable public power supply. This situation has led to increased production costs, impacting business competitiveness, sustainability, and, in some cases, resulting in closures.
Despite challenges, some companies are implementing innovative solutions to mitigate the impact. For instance, Okomu Oil Palm installed a 5MW turbine using palm biomass to generate steam, reducing dependence on costly fuel.
Industry stakeholders emphasize the need for reforms in the power sector, suggesting decentralization of the grid and amendments to the Power Reform Act to attract investors and enhance energy efficiency. The Manufacturers Association of Nigeria (MAN) President, Engr. Mansur Ahmed, calls for the resolution of complexities in the Eligible Customer Initiative to reduce dependence on petrol and diesel.
Experts, including Muda Yusuf of the Centre for the Promotion of Private Enterprise (CPPE), advocate for a decentralized grid across states and cost-reflective tariffs to encourage investment in the sector. They underscore the importance of reviewing the Power Reform Act to eliminate rigid provisions hindering independent power generation.
