BY EMEKA EJERE
Many more Nigerians may be thrown out of jobs as deteriorating power situation continues to trigger contraction or total closure of many businesses. This is even as rising inflation and high exchange rate are also pushing up prices of raw materials and other production inputs, thereby raising productions and making Nigeria more uncompetitive.
Labour Statistics Report released by the National Bureau of Statistics (NBS) on Monday, showed that Nigeria’s unemployment rate has increased from 27.1 percent to 33.3 percent in the fourth quarter of 2020. The figure is 6.2% higher when compared to the 27.1 percent recorded in the second quarter last year.
“The number of persons in the economically active or working-age population (15 – 64 years of age) during the reference period of the survey, Q4, 2020 was 122 million. This is 4.3 percent higher than the figure recorded In Q2, 2020, which was 116.8 million” NBS said.
The development comes barely 24 hours after the Manufacturers Association of Nigeria (MAN) In its bi-yearly review of the economy report, disclosed that manufacturers in Nigeria, in the last two years, (2019 to 2020), spent about N143.29 billion on alternative power supply.
MAN said its members in 2020 spent N81.91 billion on alternative power as against N61.38 spent in 2019, and called on the federal government to review the recent increase in electricity tariff.
Inability to achieve efficient generation and distribution of electricity in Nigeria has over the years remained a big challenge and a major threat to the growth of the Nigerian economy. For decades the country has grappled with serious consequences of poor electricity supply for businesses, with several existing companies struggling to maintain profitability and prospective players shying away from entering the market.
The government has undertaken several measures, including transferring majority of the power infrastructure from government to private hands under the privatization process, with little or no result.
Nigeria has the potential or installed capacity of about 19,000 MW of electric power from existing plants. But the country is only able to generate about 7,000 MW on most days, but can only wheel or transmit 4,000 MW, which is just one-third of what is required to provide for its about 200 million citizens 16 hours supply daily.
According to a 2014 World Bank survey, about 27 percent of Nigerian businesses identified electricity as the main hurdle in doing business. Also, IMF estimated per capita electricity production in Nigeria to be less than 25 percent of that of the Sub-Saharan Africa average.
The gap between the electricity generation capacity and demand in the country is a result of inadequate transmission capacity; low gas supply and very little investment in new power plants as well as poor distribution infrastructure, findings have shown.
According to a 2018 publication by the Istituto Affari Internazionali, an Italian non-profit think tank, Nigeria has been steadily generating 4,000 MW/h since 2005, with no increase in output over the past decade. This, the report noted, is costing the Nigerian economy a great deal as businesses and industries suffer due to regular power outages.
According MAN, Nigerian manufacturers have constantly suffered an average of four power outages per day with each power outage lasting about two hours. This adds to the cost of production through lost material, damaged products, and restarting the factory equipment.
The resultant high overhead cost and low return coupled with a largely uncertain business environment makes the manufacturing business unattractive to investors, analysts say.
To combat the power issue, companies depend on diesel generators for power backup, which significantly adds to the cost of their products, thereby affecting the competitiveness of their businesses. The implication is that whatever is produced in the country is more expensive when compared with production costs in other countries.
“Look at our energy sector, although recently there has been some improvement in few locations, but there is still a long way to go”, said the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf.
“When you begin to run a business or run a manufacturing firms using diesel generator or petrol generator, how competitive can we be, especially now that they are talking about African Continental Free Trade Area (AfCFTA) when we are going to be competing with other countries in Africa?”
“This is affecting their output. And in any system, when output is dropping, prices will go up, even without anything. That is basic principle in economics. Now we have stagflation and inflation, its double jeopardy.”
According to NBS’ February 2021 Consumer Price Index (CPI) report released on Tuesday, headline inflation rose to 17.33 percent year-on-year and 0.86 percent month-on-month on the back of a rise in both food Inflation and core Inflation, up 21.79 percent year-on-year and 12.38 percent respectively in the month of February 2021.
For a development economist, Bar. Fred Nzeako, until serious measures are taken to enhance the nation’s industrial production capacity, Nigeria will continue to be a highly import-dependent economy and this will continue to put pressure on the naira.
“When foreign exchange consumption is reduced, the value of naira will shore up”, Nzeako said. “And then it will translate to improved productivity and you will now see that in the standard of living of the people.”
Nzeako told Business Hallmark that even as startling as the unemployment figures released by NBS were, they are far below the reality, especially youth unemployment, if sufficient data were to be gathered.
“Government should put policies in place, encourage businesses and entrepreneurs to invest and run their businesses for the holistic benefit of the economy, via employment, via domestic productivity and via economic development”, he proffered.
The naira has lost over 30 per cent of its value in the last one year, despite regular dollar interventions by the Central Bank of Nigeria (CBN) to stabilise the local currency.
The naira depreciated against the U.S. dollar on Tuesday to close at N409.75/$1 at the Investors and Exporters (I&E) window, representing a 0.21% drop when compared to N408.90/$1 recorded on Monday, March 25, 2021 as liquidity crisis persists in the forex market.
Also, the naira remained stable against the dollar in the parallel market, to close at N485 to a dollar, the same as the rate that was recorded on the previous day. The CBN recently disclosed that the naira depreciated at the official market to N410 against the dollar.
“In order to adjust for the decrease in supply of foreign exchange, the naira depreciated at the official window from N305/$ to N360/$ and now hovers around N410/$,” the apex bank stated.
Not even the hospitality sector has a different story to tell in terms of ease of doing business. Mr. Joseph Abohweyere, the managing director of Theodawn Hotels, Ikeja, Lagos, said it is the love and passion for the service that is keeping him in the business as he would have closed shop due to tough business environment in the country.
“We keep trying to survive. You don’t have electricity; you’re burning diesel at a very expensive rate; you have to maintain your generator. It’s an uphill task”, Abohweyere said in a chat with Business Hallmark.
“And I had people that came back with me (from Switzerland) and they’ve all gone back. They could not continue. Several people that came to Nigeria to invest, they lost it all. And instead of continuing, they left.”