• As Tinubu assures investors of conducive environment
By Merit Ibe and Juliana Taiwo-Obalonye, Abuja
Despite persistent assurances to local and international investors by President Bola Tinubu that his administration would guarantee a more conducive operating enviroment for businesses to thrive, the Manufacturers Association of Nigeria (MAN) has raised the alarm that more manufacturing companies may leave Nigeria for other countries if tariff regime is not improved. It stated that already, several international manufacturing firms had exited Nigeria on account of its perennial power crisis, coupled with the unpredictability of the country’s foreign exchange rates prior to its recent unification.
President of MAN, Francis Meshioye, who articulated MAN’s view in a statement said the over N144billion spent on alternative sources of energy by manufacturers in 2022 impacted adversely on the operations of members. He stressed that any further hike in tariff would lead to an exodus of companies and called on the government to reconsider the move.
“In every system there’s always a core structure and this includes the elements that make up the total cost spent in generating your revenue. Now, what we experience as manufacturers is that energy cost is a major cost in processing our products.
“Now, if you spent N144billion on alternative energy sources in one year, you can only imagine the impact which that will have on your cost of operations. The manufacturing business in Nigeria is affected by so many factors, energy is a major one.
“Manufacturers provide almost every infrastructure by themselves. Outside the major roads, you find out that manufacturers provide water, power, security, etc. So when you look at it, you find out that the cost of doing business is so huge, that a businessman will ask, is this the only place I can do my business? Can I move my capital elsewhere?
He noted that the downsizing of businesses in Nigeria, for instance, shows that businesses are not doing very well.
“So this power issue and other things have made some manufacturers, particularly international businessmen to relocate from Nigeria to other countries.” He stated that something should be done about the power issue, adding that raising tariffs was not in the interest of manufacturers.
“Therefore anything to reduce this energy cost will be very beneficial both to manufacturers and the masses in general. So it (power) is a high cost to us, and a major driver in terms of cost. At the same time, it could lead to other things.
“It is one of the things that make some manufacturers to seek to move their business to another region and site their factories there. It is not the only reason, but, of course, it is one of the major ones,” Meshioye stated
The association had stated that its surveyed data suggested that manufacturers spent at least N144.5billion on sourcing alternative energy in 2022, up from N77.22billion in 2021.
This, it said, translated to about 87 per cent increase in the cost of access to alternative energy sources by manufacturers within a year.
“In the last eight years, electricity tariff has been increased by 186 per cent. The fact that the government itself is owing N75billion in unpaid electricity bill is indicative of how burdensome the cost of electricity has become.
“Therefore, it is highly concerning for manufacturers to witness the electricity tariff skyrocketing beyond the present high prices. A 40 per cent hike at this time is simply outrageous.”
When asked to name some other reasons that might make manufacturers to exit Nigeria, Meshioye replied, “We have the unpredictability of the foreign exchange rate.
“In a business model, the more predictable the forex, the better you are. But the availability of the forex itself is another thing. All these are problems that border manufacturers.”
Meanwhile, President Bola Tinubu has assured genuine local and foreign investors of his administration’s commitment to providing conducive environment.
Mr Julius Rone, Group Managing Director of UTM FLNG Ltd, made this known after a meeting with Tinubu on Wednesday in Abuja.
The investors from France and Japan pledged to invest $5billion in the floating Liquified Natural Gas sector during a meeting with the president.
Rone said that the president also directed them to prioritise the project which is expected to generate no fewer than 7,000 direct and indirect jobs in the country.
He said that the investors from Technip Energies of France and JGC Corporation of Japan, were also directed to report any challenge to the president in the course of implemention. Rone added that the two companies would invest about $5billion in the floating energies in collaboration with the NNPC Ltd, while the Afrexim bank is working on the financing aspect.
He said that the project would have a 300,000 tonnes capacity of LPG per annum as well as meet 25 per cent of local demand of the gas.
On local content, Rone said that a number of Nigerians are already being trained on handling of the various equipment for the project.
He added that plants would also be created for the delivery and marketing of the products to customers on completion.
Rone was on the visit with Ms Emmanuelle Blatmann, the Ambassador of France to Nigeria, Ms Hiromi Otuski, Deputy Ambassador for Japan to Nigeria, Mr Naoki Noguchi, MD JGC, and Mr Sadeeq Mai Bornu.