Subscribe Now

Trending News

By using this website, you agree to the use of our cookies.
Data Stories

How Low Power Supply Stifles the Growth of SMEs

In the bustling area of Apete, Ibadan, in SouthWest Nigeria, the struggles faced by small business owners due to a lack of reliable power supply have become increasingly apparent.

Azeez Taofeek, a 23-year-old barber, and his three apprentices experience the daily challenges of operating their shop without stable electricity. They have relied on alternative means, such as solar power or generators, to carry out their work for over three months.

Speaking with one of Azeez’s apprentices, John Ayomikun, he explained that despite utilising solar and generators, the constant need for fuel and rising costs pose a significant challenge to their small business.

Mr Ayomikun said, “We are trying to manage. It’s been a long time since we had stable electricity. Though we use solar and petrol to carry out our work, the issue and cost of getting petrol are challenging us and our small business. We are only managing to get everything right.”

“Despite the landlords’ meeting every Saturday, there has not been any solution. Before, our charge was N700 for a full haircut, but with the hike in petrol, we cannot continue with that price,” he continued.

He expressed the need for intervention from the community leaders or government authorities, emphasising that the increasing fuel costs make it difficult for them to sustain their services at the former price – forcing them to reconsider their pricing.

“We need the landlords to intervene or the government to look into the issue of electricity, mostly because of the small business owners that cannot do without electricity. It’s difficult to survive if we still have to use out of our small profit to get petrol or cater for solar,” he said. 

Small and Medium Enterprises (SMEs) play a vital role in Nigeria’s economic growth, employment, and poverty alleviation. According to a publication, they contribute 48% to the national GDP, cover 96% of all types of businesses, and provide 84% of employment. 

A viz showing the contribution of SMEs to Nigeria’s economic growth

However, the persistent unstable and unreliable power supply issue has grounded numerous small businesses that need more resources to explore alternative electricity generation.

Abeeb Abdullahi, a 32-year-old welder with ten years of experience, also faces the consequences of unreliable power supply and increased fuel costs. He has limited his working days to three per week to curtail the challenges, hoping to save on expenses. Nevertheless, the constant loss of customers due to insufficient power availability adversely affects his business.

On Monday, 5 June, Mr Abdullahi’s workplace was deserted. He was seated idly, staring into space. He considers the removal of subsidy a total disadvantage as he can hardly afford to buy a litre of Petrol for N620 per litre. 

Mr Abdulahhi’s workshop

He said, “As a person with this type of work, you only depend on the generator before you can work. There is no other way to do it, and I cannot remember the last time we experienced ‘good’ electricity from the NEPA,” he said.

With a similar ordeal, Sanni Olusanya, a worker at a sawmill in Orita Obele Junction, Akure, also gave an account of his experience.

“We run on generators for almost 24 hours because NEPA only brings light for 3-4 hours daily, which is not even regular. Throughout the six days we work weekly at the sawmill, they give us electricity for about 12 hours.”

The epileptic state of power supply in Nigeria has taken most of these companies out of operation. Mr Olusanya said, “In the past, there were about 32 sawmills in this area. But the number has been reduced to 4 because of poor power supply. The generator’s sound is even enough to discourage one from working.”

Despite the toll that poor electricity supply takes on the business, the saw millers cannot help but rely on generators to keep business running. 

“Our workers get dissatisfied when there is no work to do at the sawmill, and they run away because they also have a family to feed.

“Lack of electricity supply has made our business one without gain. Because of the money we have to spend on diesel, we can only afford to pay our workers a small amount to ensure that they can put food on their tables,” Mr Olusanya lamented. 

“Electricity Bills Inequivalent to Supply”

In June, the power Distribution Companies (DisCos) announced that the tariffs payable by electricity consumers would increase by 40 % from 1 July 2023, despite several reports about its low electricity supply in Nigeria. The DisCos were formed by 11 electricity companies, catering for power distribution to all 36 states in Nigeria.

The Ibadan Electricity Distribution Company (IBEDC) is in charge of power supply in Ibadan. However, the revenue jointly generated by the DisCos differs from the country’s electricity supply for the last eight years. 

Dataphyte revealed in its analysis that “Over the years, DisCos supply of electricity to their customers was never proportional to the revenue they got off their customers.”

“Within eight years, the 11 DisCos together tripled their revenues (an increase of 197%) but barely increased their supply of energy to their customers (an increase of 7%) for almost a decade,” the analysis explained. 

According to a National Bureau of Statistics report, “Revenue collected by the DisCos during the period of Q1 2023 was N247.33 billion from N232.32 billion in Q4 2022. On a year-on-year basis, revenue generated in the reference period rose by 20.81% from N204.74 billion recorded in Q1 2022. 

Electricity supply was 5,852 (Gwh) in Q1 2023 from 5,611 (Gwh) in the previous quarter. However, on a year-on-year basis, electricity supply declined by 1.74% compared to 5,956 (Gwh) reported in Q1 2022″. 

The high costs of electricity bills do not tally with the electricity supply, which has greatly affected SMEs. 

Timileyin, a welder at the FUTA junction in Akure, said, “We use electricity to work every day of the week from 9:00 a.m. to 7:00 p.m.,” he said.

“It has been a week since we used NEPA electricity, so we mostly run on diesel-powered generators.”

He then lamented that the monthly electricity served by the Benin Electricity Distribution Company (BEDC) is too outrageous and is not justified because they do not provide a regular electricity supply. 

“Despite not enjoying a stable electricity supply, we still have to clear electricity bills served to us by NEPA almost every month. Since we can’t delay our work, we must find an alternative, although we prefer using the NEPA electricity supply.”

 A picture of men working

The Way Out

According to Omokhomion Promise, a business coach and expert, there is a rising need for collaborations between the government and private sector entities. He believes electricity challenges can be addressed through sustainable partnerships, and the government could encourage public-private partnerships to invest in adequate power generation.

Without this, he said, “SMEs would continue to experience low productivity in their workplaces and a delay in their services.  

Equally, Iremide Olatunju, a business analyst, believes that businesses will continue to die, and their customer services will be affected. It will affect productivity. 

In a survey carried out in 2021 for a study titled “Electricity outages and its effect on small and medium scale enterprises (SMEs) in Nigeria,” 110 business owners were asked about their most reliable source of power. 

The survey revealed that out of 110 business owners, 70.9% (78) rely on generators to run their businesses, while 22.7% (25) depend on electricity, and 6.3% (7) did not respond.

A viz showing the result of a survey on the reliable source of power for SMEs

When asked a similar question, Mr Olusanya commented, “We prefer to use NEPA electricity to work because even the propelling of the machines is better with it than with a generator. Even if NEPA can provide electricity for an hour, it is better than using a generator for that period.”

“The government should be put to blame. If BEDC isn’t up to providing stable electricity, the government should take the project from them. And if possible, they should go back to the dam to check the power generation rate”, Mr Olusanya declared.

This story is funded by the Centre for Journalism Innovation and Development (CJID) under the Campus Reporter project.

Related posts

Leave a Reply

Required fields are marked *

Copyright © 2022. All Rights Reserved.