Low diesel supply: Hard times ahead for manufacturers

Ayodele Samuel, in this report takes a look at the seeming unending power problem in Nigeria's manufacturing sector, as LPFO (black oil) and AGO (diesel) witness price hike. Hard times are ahead of Nigeria manufacturing sector following the increase in the price of LPFO (black oil) and AGO (diesel) by the Petroleum Products Marketing Company (PPMC), as poor electricity supply continue to have devastating effects on manufacturers' operating cost. Manufacturers holds the poor state of electricity supply as the major factor responsible for factory closures, relocation of production lines and hundreds of thousands of job losses in the last one decade. The  Manufacturers Association of Nigeria (MAN) had argued that the price hike move was capable of crippling many companies  and could have  negative effects on the economy as may firms might closed shops. According to MAN, the PPMC had in a memo last week, signed by the Depot Manager Kaduna, Shettima Bukar Imam, and copied to marketers among others, said the management of NNPC/PPMC had approved new Ex/Depot prices for AGO N126.30/Litre (old price) to N128.92/litre (new price) and LPFO N68/litre (old price) to N85.91/litre (new price). According to the memo, the prices took immediate effect adding that ex-depot prices of PMS, DPK as well as other special products remained unchanged. The manufacturers in a petition addressed to the Presidency Minister of Petroleum, Minister of Finance, Senate President and   Speaker of the House of Representatives and signed by Olushola Olabinri, described the sudden hike as shocking and arbitrary, calling for its reversal. MAN described the policy as draconian and superfluous, because the brunt would be borne by the masses as the cost of production of various household consumables would increase drastically. It warned that the high cost of LPFO was making most industries to fold up and therefore appealed to the government to reconsider the situation and return to the status quo. Also Chief Michael Daramola, MAN Chairman, Oyo/Osun/Ondo/Ekiti states branch, said that inspite of the country's huge and diverse energy resources endowment, electricity was ranked as the most critical infrastructure constraint, adding that it had resultant effects on members operational cost, production stoppages, output losses and destruction of machineries and raw materials.  "A review of the overall performance of the economy in year 2011 revealed to be reasonably fair despite the plethora of challenges that have continued to render the business environment unfriendly. Outlining them, as usual, is tantamount to reminding us of pitiable state of the manufacturing sector.  "Notwithstanding, reasonable success and growth were achieved in some areas of the economy. Interestingly, we were able to weather the storm despite the seemingly harsh operating environment. Our efforts at keeping our businesses afloat in the face of multifarious challenges deserve to be commended," Daramola stated. He stated further that, "We cannot forget in a hurry, the devastation of some of our member-companies facilities, especially in the Oluyole Industrial Estate during the year 2011 flood disaster which occurred precisely in the month of August. The disaster sadly claimed properties and products worth billions of Naira. We sincerely hope that your excellencies will proffer appropriate solutions especially in the area of adequate infrastructure needed to attain greatness in the industrial sector."  MAN is, however,  projecting a 25 per cent manufacturing sector contribution to the Gross Domestic Product (GDP). MAN National President, Chief Kola Jamodu said if realised it would pave the way for achieving the Vision 20:2020 objectives. Jamodu said: "We know that the contribution of the manufacturing sector to the  economy is very shallow, that is about four per cent and for Nigeria to realise its Vision 20:20:20 objective, we are thinking of growing from that stage to about 25 per cent GDP contribution to the economy. "We have articulated programmes that will ensure that over a period of time we will achieve that plan. MAN will continue to adopt appropriate technology and continue to produce a high quality products. We want cars made in Nigeria to equate quality," he said. He added that the sector will continue to remain steadfast in championing the manufacturers' interest within the country's economy,"he said. "MAN has come up with a blue print which is intentionally a road map that shows that the economy has brought forth intervention programme with very detailed means of implementation," he stated.

Published in Peoples Daily Newspaper, August 16 2012 Page 20