Operators of small and medium scale businesses across the country are groaning under high operational costs, which they said have risen due to spike in electricity bills.
This is coming at a time when the economy has been badly affected by the COVID-19 pandemic which had plunged Nigeria into recession, with only a slight growth recovery of 0.11 percent, recorded in December 2020, according to the National Bureau of Statistics (NBS).
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However, the inflation figure from the bureau in January 2021 points to a record 16.47 per cent which was 0.71 percent higher than the figure for December 2020. The food index rose farther than ever with a record 20.57 percent in January 2021 compared to the 19.56 percent recorded in December.
Business owners frustrated in Lagos
A bakery manager at Ogba Lagos, who simply gave her name as Miss Gbemi, said the owner of the bakery recently decided to close shop because of the high cost of production.
This, she said, was worsened by the exorbitant electricity bill which led to the disconnection of their light for months before the bakery was shut down.
“Our bills continued to pile up and we were owing over N300,000 before the Ikeja Electricity Distribution Company disconnected our light. For over six months, we were running a generator for production and running of the office. It was not easy.
“At the time I left the bakery two months ago, the owner was owing me about three months’ salary. It was really tough,” she said.
The manager added that the owner was planning to relocate to Ogun State with the hope that things might get better.
“But as I am talking to you, the company is no more in existence. I am also not privy to the plan by the owner to bring back the firm. All I know is that he is making frantic efforts to set up the bakery in another location, but that has not happened,” she said.
“One of the issues we faced again,” she added, “was the high cost of everything. It is definitely not only about electricity. The price of every bakery ingredient has gone up astronomically and one can hardly break even in this circumstance.”
The Chief Executive Officer and Managing Director of FAE Limited, a paper firm in Lagos, Princess Funlayo Bakare-Okeowo, said in spite of the high cost, power supply is not steady as her business premises enjoys power supply three times in a week, which makes the company resort to the use of generator.
Her firm with 49 employees spends about N8 million monthly on diesel to augment for poor power supply.
“It is a big problem and one of the challenges that are not giving Nigerians the buying power because all the cost at the end of the day is transferred to the end users who eventually get demoralized by high price of goods/commodities and what happens if after manufacturing goods, people don’t buy because of the high price?”
She appealed to the government to, as a matter of urgency, find a lasting solution to the problem.
SMEs grounded in Kano
A visit to Dakata Medium scale Enterprises (MSEs) hub in Nasarawa Local Government Area of Kano State revealed a shadow of what the area used to be.
The area was a bubbling hub full of business activities, but it was discovered that most cottage factories such as plastic companies, table water and vegetable oil producers have closed down.
According to the manager of Ice Table Water and General Enterprises, Mr Lucky Okon, aside other economic bottlenecks, what really forced MSEs to close down in the area was high electricity tariff.
He added that initially, his factory with over 75 employees spent N250,000 to N300,000 per month on electricity, but now the factory spends N750,000 per month just on electricity.
“Though we are still operating, others have since closed down their factories because they cannot afford the outrageous electricity tariff and even those that are currently operating will soon close down due to unfavourable business atmosphere,” he revealed.
Similarly, the leadership of vegetable oil producers in the area said over 60 percent of its members have closed down due to various economic issues in which high electricity tariffs top the list.
According to the administrator of the Dakata Chapter of Vegetable Oil Producers Association, Alhaji Ahmed Rufa’i Yakubu, those that are still operating have devised a means in which an individual buys and installs a transformer and then gets the light from Kano DisCo and pay according to the units he consumes.
In Abuja, firms raise prices of goods, service
To stay afloat, some of the business owners said they have turned to the last resort of increasing the prices of their goods and services, just to stay afloat.
At Wazobia Treat, a restaurant in Jabi District of Abuja, an official said N10,000 unit of electricity consumed in a week before January 2021, has increased to N20,000 with a higher tariff price.
The Finance Director, Ahmed Onoja, noted that apart from being billed with a commercial customer (C2) by the Abuja Electricity Distribution Company (AEDC) on a prepaid meter, electricity consumption in the area the business is located is categorized among those at 24 hours, triggering a higher cost.
“Electricity is what a business like this cannot do without. But with the high cost of diesel and electricity, our overhead cost has increased drastically.”
He, however, explained that to meet up with the cost, a decision was made to review the prices of the commodities they sell.
“We try to look at some marginal increase in what we are selling, thus, our food prices have also gone up. What we sold for N600 before has increased to N650 or N700 to enable us meet up with the cost of electricity.
Entrepreneurs say electricity rate hiked in Niger
Businesses owners in Niger State are also singing similar tunes as they believe electricity rate is a major part of their production cost.
Mrs Okwy Ohagwa is a coconut oil producer who has laid off some workers to meet up with the electricity tariff obligation and still remain in business.
“The new tariff is unbearable for manufacturers based on past bills and looking at the factory production capacity. My recharge at the factory used to be N3,000 weekly and now we recharge N8,000 despite the fact that the supply is not constant in the state.
“It’s funny that I was disconnected while I was away but I hope that will change soon. Four of my staff members have been laid off and I still can’t meet the demand of my clients. I need an additional 10 or more staff to meet up with demands and now that the tariff is killing, I can’t help but to still reduce the little I have.”
Brewa Universal Investment Limited, a medium-scale business firm in Niger, now uses N10,000 worth of electricity in three days instead of seven days previously, indicating a double rise in the electricity cost.
Personal Assistant to the Manager of the Brewa, Maryam Ibrahim, lamented that the units have reduced to the extent that it can only last for three days.
“We end up recharging twice in a week and we try to run the generator whenever the light finishes which is additional cost on the company but we want to see how to balance and also produce within a time frame so that we can get through a certain time set for production,” she said.
More woes, concerns from the south
Aba is a commercial hub in the South-East, but rather than expand, power failure is typically stifling the hub. Although Aba is close to the over 500 megawatts (MW) Alaoji NIPP power plant, and another 100MW Geometric Power, an Independent Power Plant (IPP), bottlenecks have not allowed adequate power supply to consumers.
Rather, business firms struggle with grid supply from the Enugu Electricity Distribution Company (EEDC) amidst high tariff charges, scores of operators revealed.
At the Shoe Plaza around the Power Line axis of Ariaria International Market, Mr Goodwin Nmeri, the Chairman Powerline Shoe Manufacturers Association with approximately 43 staff, said the COVID-19 hugely affected the manufacturing industry.
“Two years ago, President Muhammadu Buhari commissioned a 9.5MW IPP built by a private firm under a partnership with the Rural Electrification Agency (REA) at the market to supply electricity to 47,000 shops. That arrangement went bad a few months after operating,” said Nmeri.
Now, he spends more fuelling his generator to produce shoes, at N180 per litre. He could not cope and had to lay off 18 staff.
In Port Harcourt, the Rivers State capital, many medium scale businesses are said to be operating at a high rate due to the high cost of electricity.
Emeka Obiafor who owns an aluminium fabrication company in Oyigbo area said he pays about N100,000 monthly on electricity bills.
“I am into aluminium fabrication and I have about 30 people working for me who receive salaries. We pay on estimated bills and every month they bring a bill of N100,000. Before now we were paying around N35,000 on estimated bills but it has increased to N100,000. They (Port Harcourt DisCo officials) told us that they buy power at a very high cost (from the Generation Companies).
Obiafor’s frustration is however more on the fact that the power supplied is epileptic. “Most times, we use generators to power the high calibre machines we use to fabricate the aluminium. I am finding it very difficult to pay salaries.”
Worsening the situation is the fruitless effort for Obiafor to get a meter and quit estimated billing. He has paid N50,000 but hasn’t had a meter.
Mrs Ekema Akpan, a former vice chairperson of the Manufacturers Association of Nigeria (MAN) in Port Harcourt shares a similar tale with over N150,000 monthly bill. A school she owns was disconnected by PHEDC at a point as electricity bills amounted to N2.8m.
Despite the bills, she has to complement grid electricity with generators for the school and her other business firm.
“The issue of electricity tariff is killing small and medium scale businesses. So many manufacturing companies have closed shop because many of them cannot bear the cost of paying high electricity tariff, cost of production and payment of salaries,” she noted.
Bakers and sachet water manufacturers in Calabar, Cross River State, are also feeling the heat.
Mrs Elizabeth Nsima whose firm is the name behind Royal Bread found across Calabar and environs with 37 staff members, said she now pays over N100,000 electricity bill monthly instead of below N30,000 earlier still under Port Harcourt DisCo (PHED).
“I am finding this frightening and outrageous bill intolerable. How much is left to pay my staff? Other rising costs have also affected the bakery business. But this estimated electricity bills should be looked into quickly,” she pleaded.
Johnson Akpan has about 40 staff in his bottle water firm and has operated for five years. For the past four months, he’s been paying averagely N110,000 monthly.
“It is compounding my challenges. I now owe my workers as a result. I am now cut between having to plead and give explanations why I won’t be able to pay full salaries or none at all. It is bad.”
For now, Akpan considers downsizing his workforce to stay afloat.
In Bayelsa, owners of medium scale businesses say the high cost of electricity tariffs is almost ruining their businesses and could make several business enterprises fold up.
Emeka Godfrey, who operates a cold room business in Yenagoa, said that his business is facing serious challenges due to high cost of electricity tariffs and epileptic power supply.
“I think the monopoly that the government is giving to the power distribution company is the cause of these problems. How can I pay between N40,000 and N50,000 on a monthly basis without using light for even 10 hours in a day?
“Sometimes, we stay in Yenagoa for weeks without light and the only time PHED will bring light is at the end of the month when they want to collect bills and disconnect debtors.”
A chemical supplier in Yenagoa, Mr Chris Chubike has urged the government to have a rethink on the tariff increase.
“Although I pay over N60,000 electricity bill monthly, they still tell me that I owe them when we don’t even see light.”
We’re also facing challenges – Power firms
To cushion the worries of power consumers in its franchise areas of Kano, Katsina and Jigawa, the management of Kano Electricity Distribution Company (KEDCO) called on consumers to promptly clear their bills so they can be served better.
It insisted that the company has recorded over 331,000 customers across the three states that were yet to settle their February bills and that constitutes a huge challenge to KEDCO operations.
“As many of our customers have attested to the fact that we have improved on our services to our customers, we need to be encouraged to continue on that path, hence the appeal to our numerous customers to pay up their bills,” said Ibrahim Sani Shawai, the KEDCO spokesman.
An official of Abuja Electricity Distribution Company (AEDC) said the company often takes extra power beyond what is allocated to it from the national power grid to ensure it supplies more electricity to its consumers across FCT, Nasarawa, Niger and Kogi.
On the issue of metering, the DisCo said data from the Nigerian Electricity Regulatory Commission (NERC) proves that it was ahead of metering consumers in Nigeria, noting that electricity tariff has not been increased.
Checks by the Daily Trust on Sunday revealed that although the DisCos said they have not increased tariff after the Minister of Power, Engr. Sale Mamman, directed a suspension of the January 1, 2021 tariff hike, there is contrary evidence from consumers.
Most consumers spoken to still report nearly double increase in their electricity cost per kilowatt hour (KWH) unit since late December 2020.
In some localities across Nasarawa, Benue, Niger, Enugu, among other states that were deemed to be having supply of less than 12 hours and had their tariff frozen in the January 2021 tariff hike supposedly reversed, power consumers especially those with meters, have recorded at least N3 and more increase in every unit of electricity they consume.
We’re paying N50bn monthly subsidy to lessen pains – Minister
The worries of poor power supply amidst rising bills as noted by consumers, was also echoed by the minister recently.
Engr. Mamman said to cushion the effects of tariff especially during a period ravaged by the pandemic, the federal government spends N50bn monthly to subsidize electricity supply across the country.
According to a statement, the minister said the funds are provided to augment the shortfall of the DisCos who have failed to defray the cost of bulk electricity supplied to them by GenCos.
However, following a minor increase in the tariff regime, he said the subsidy has now decreased by half, but still constitutes a serious drain on the nation’s economy.
Mamman who was concerned about the DisCos’ instability, said the development has forced the government to partly subsidize the power sector to keep the cost of electricity within the reach of the masses.
“Through the Presidential Power Initiative and other intervention measures, the government is diligently working to massively resolve all these inherited problems that have continuously frustrated the success of the sector.”
To also ensure that consumers account for the energy they consume, the government was committed to supplying over six million meters free and that about one million meters have already been delivered for distribution.
He called on the DisCos to expedite the distribution of meters free to their consumers as a way of lessening their problems.
By Simon Echewofun Sunday, Faruk Shuaibu (Abuja), Victor Edozie (Port Harcourt), Romoke W. Ahmad (Minna), Ibrahim Musa Giginyu (Kano), Abdullateef Aliyu, Christiana T. Alabi (Lagos), Linus Effiong (Umuahia), Eyo Charles (Calabar) & Bassey Willie (Yenagoa)