Top firms battle rising costs as energy bill hits N221bn

Prime listed firms in Nigeria are going through elevated overhead prices as their mixed power invoice hit N221 billion within the first half of 2023.

The excessive power prices are being pushed by numerous components, together with the rising value of diesel and the depreciation of the naira. This has put a pressure on the underside line of firms, which now must go on the upper prices to shoppers.

The highest listed corporations are Dangote Cement, BUA Cement, Dangote Sugar, Transnational Company, Lafarge Cement, BUA Meals Plc, Constancy Financial institution, and Wema Financial institution.

Knowledge obtained by BusinessDay from their monetary statements confirmed that the eight corporations recorded an 18.35 p.c enhance in power prices to N221.75 billion within the first half of 2023 from N187.36 billion in the identical interval final 12 months.

Main the pack with the very best power prices reported within the first half of 2022 are the cement makers, with Dangote Cement spending N157.020 billion on gas and energy, a 20.82 p.c progress from 2022.

“Vitality is a significant problem within the manufacturing sector. By the point you spend cash on fuel, black oil, diesel and different power sources, your manufacturing value will likely be so excessive,” Israel Odubola, a Lagos-based analysis analyst, stated.

“In some international locations, energy takes solely about 10 p.c of their manufacturing value. In Nigeria, energy, typically, takes as much as 50 p.c of our manufacturing value,” he added.

Additional findings confirmed BUA Cement spent N47.91 billion on power within the first half of 2023, a rise of 9.92 p.c from N43.58 billion reported in 2022, whereas Dangote Sugar recorded N42 million in comparison with N29 million recorded in the identical interval of 2022.

BUA Meals Plc’s diesel and gas prices accounted for N216 million within the first half of 2023 from N122 million recorded in the identical interval of 2022.

Constancy Financial institution posted N366 million as its electrical energy value within the first half of 2023 from N271 billion recorded in the identical interval of 2022, whereas Wema Financial institution recorded N829 million as its diesel bills within the first half of 2023 from N685 million recorded in the identical interval of 2022.

BusinessDay findings confirmed rising power prices disrupt productive actions in Africa’s most populous nation as factories self-generate greater than 14,000 megawatts of electrical energy as a consequence of poor provide from electrical energy distribution firms.

Knowledge sourced from the World Financial institution’s Energy Sector Restoration Programme stated insufficient energy provide prices companies in Nigeria about $29 billion yearly.

It additionally noticed that Nigeria had the most important variety of individuals with out entry to electrical energy worldwide, as one in 10 individuals with out entry to electrical energy at the moment resides in Nigeria.

In response to paperwork compiled by BusinessDay from the Producers Affiliation of Nigeria, member firms spent N639 billion on different power sources between 2014 and 2021.

A survey by BusinessDay confirmed many producers are now not counting on electrical energy distribution firms, popularly generally known as DisCos, for electrical energy provide of their manufacturing models or factories.

They’ve switched to fuel or low-pour gas oil to keep away from struggling losses arising from an influence outage throughout manufacturing actions.

Findings confirmed some firms which have deserted the Discos embody Flour Mills of Nigeria, Dangote Group, Cadbury, Haffar, Kam Industries, and Qualitec Industries, amongst others.

It was gathered that some producers solely use public electrical energy provide in places of work however utilise different energy sources within the manufacturing strains.

It was additionally reported that some SMEs spend as much as N3,000 per day on diesel, in keeping with the Producers Affiliation of Nigeria. The value of diesel has greater than doubled from round N300 a litre to over N600 per litre in a single 12 months. The Russian invasion of Ukraine has skyrocketed fuel costs, forcing up manufacturing prices.