Manufacturers in talks with DISCOs over alleged N27 billion electricity debts – MAN

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Mr. Segun Ajayi-Kadir is the Director-General of the Manufacturers’ Association of Nigeria (MAN). In this interview with our correspondent, he bares his mind on the Nigeria’s exit from recession, instability in the power sector, the Executive Order on Ease of Doing Business among other salient issues. Excerpt;

Late last year, the federal government announced the country’s exit from recession. Now, tell us how this development has impacted in the manufacturing sector of the economy?

Exiting from recession is a technical issue just like entry into it. You have negative growth two consecutive quarters, you enter into recession and so when you record the positive ones, you exit. But it’s something that gives comfort to everyone including the manufacturing sector and it is certainly a result of combined efforts of government through various instruments and policies and initiatives to get Nigeria out of it. So, yes, being out of recession has restored confidence in the economy, it has emboldened people to invest and expand; it has given hope that the economy is rising.

So, for the manufacturers, part of the measures that were undertaken by government has tended to have a positive effect. For instance, the relative stability in the FX and also availability, the list of 41 items was moderated though not completely but it gave some succor and the $20,000 guaranteed fund for the small-scale industries. The Executive Order has also help to sustain that Ease of Doing Business.

So, yes, it has had this positive effect on manufacturing. What it has done majorly is that we have been able to improve our capacity utilization but again, the dwindling nature of disposable income has also meant that our unplanned inventory is rising. Yes, it has had positive impact but we are still constrained as a sector.

Still on recession exit, it will be recalled that the World Bank warned that if Nigeria is not careful with her policy implementation, it may likely slide back into recession. What major steps do you think that government needs to take to ensure that the Nigerian economy did not slide back into recession?  

What the World Bank is saying is true and it has a universal application. Any economy that is not proactive will slide into recession, the only thing that made our own to be in focus and made our economy more vulnerable is that we just exited one and there are certain measures we took to get out of it. The first and most sensitive thing is that you do not relax those efforts, you do not become complacent. So, you must continue to drive those measures to conclusion and make sure that you do not allow other negative ones to come into force. For instance, one of the measures that must be taken and quickly too is to ramp up on the infrastructure deficit because power is key, lots of government efforts at improving it but the situation we have is that the debt over hang on the manufacturers, the debt that they are not owing the DISCOS that they are insisting we pay is a major issue. Our inability to access the 2,000 megawatts of electricity that is stranded because the precondition for it is payment of all outstanding debts which we are not owing and we are in court over. We are trying to reach an out of court settlement but we are owing up to N27 billion of debt we believe we are not owing and certainly, if the manufacturing sector will cough out that amount, we will go under, there is no doubt about it. So, it’s a debt that cannot be paid.

And also roads, look at the situation at the ports, it takes two weeks for you to get your containers out, people are paying demurrage. So, I think there are still some steps that government needs to take to ensure that we do not become complacent and I am hopeful that we will not because also the manufacturing sector is resilient. I think we must give kudos to those who managed our manufacturing industries and surviving against all odds.

Talking about surviving against all odds and power being the most critical factor in manufacturing and you cannot boast of two hours uninterrupted power supply, can you quantify in monetary terms what the manufacturing sector loses as a result of non-availability of power?

I can certainly give you figure; first half of 2016, it was N62,955,247,654.99, in second half of 2016, it was N66,985,614,449.50 and in the first half of 2017, we spent N66,026,189,159.26. that of second half of 2017 is not handy yet. But the truth of it is that without steady power supply, you are joking about industrialization. It’s just so fundamental; in some sectors like steel, power is about 40% of their cost not less. So, when it is not available, it is an issue, when it is available but not in the right quality and timeliness, it’s an issue. So, you have a lot of deficit in that area you can’t industrialize.

So, I mean, the cost of providing power, you know how much Diesel is sold, the cost of providing power for yourself, the lack of attention it will cost you in other, because we don’t operate in the power sector, operating generators has become an industry on its own with its attendant disruptions but it is key to the survival of the manufacturing sector.

Is there any incentive from the government mitigate what the manufacturers are losing to stay afloat?

Yes, we have the infrastructure relief which they provide but it usually for virgin industrial areas which eventually needs it. There are reliefs because you can’t be providing infrastructure for yourself. There are also quite a number of government incentives that are generally not specific to power sector. However, this eligibility customer scheme is one that would have given us a lot of hope meaning that if you take more than 2,000 megawatts of electricity, you don’t have to go through the DISCOs; you can go through the GENCOs to get power. And so, we were naturally excited about it because if 2,000 megawatts is available for manufacturers, it will go a long way to mitigate our sufferings but the preconditions for it has put panel in the works, we are not able to access it as at yet and the discussions between us and DISCOs, although it is going well but we are yet to conclude.

You talked about the Executive Order aiding the manufacturers in their business, now, by June this year, the Order would have clocked one year. Looking particularly at the nation’s maritime sector, do you think that the Presidential Order on Ease of Doing Business has actually worked?

To be fair, I think that the Executive Order signed by Mr. Vice President when he was Acting President really came with some reliefs but you know there are some fundamental challenges that have tended to militate against the whole realization of the objectives of the Executive Order. For instance, the gridlock around the ports has simply made the successes that would have been recorded to pale to near insignificance because I mean, even if you are able to clear your goods much faster, if there had been reduction in the number of agencies that are there, if the processes have been improved upon and you can’t go in to pick your consignments or after you have gone in to pick them, you spent time to come out, it tended to rubbish what you have achieved.

So, by and large, I think that once there is an institutional framework for achieving a success and ease, I think one should give kudos for that because you can then be sure that if these other issues are there too, you do business with more ease. Of course, in terms of registration of business and all those processes, I think it had done excellently well.

Talking about the gridlock at Apapa, from the manufacturers’ perspective, what do you think could be the solution to it?

We have talked about having a truck transit park, obviously, that is not working and trucks are not little stones that you pick away, the sheer logistics of compelling them is an issue and if you have something to pick from the port, you need to go by road to pick it by the structures we have now. I mean one of the most effective ways is to make use of the rail and the waterways. Incidentally, these two means of transportation are linked to our port.

So, government should take immediate action to reactivate those channels, I mean it will take the pressure off the road and we have so many roads that are being degraded because of the presence of these trucks and more dangerously also, the bridges. But the relief is that there is progress being made on the repair of the roads and we received assurances from the private people doing it that it will last much longer and this is an opportunity for us to realize that it is not sustainable, it is not efficient for us to rely on the roads alone, we need to improve activities along the rail lines and by sea as well.

Manufacturers have been accused of contributing to the gridlock in Apapa by not making use of the ports in the eastern region to import their goods; all of them want to use Lagos ports. How do you react to this?

That cannot be true but to start with, where you pick up your goods, I don’t think it’s a matter of choice; it’s a business calculation you have to do. If my industry is in the east, why would I want to come and pick my raw materials in Lagos? It costs me more to take it to the east and as a businessman; every cost structure sinks into your production cost. So, I mean, it’s simply untrue.

I think the issues we had and government had tried because I have actually sat on the Committee on improving the use of the ports in the eastern parts of the country. There are quite a number of issues, some of them regulatory, some of them it has to do with the depth of the port, some of them in terms of business calculations, maybe government also making inroads into how they can the private to provide such. So, as you can see, there are so many issues but certainly it cannot be he choice of the manufacturer, no.

Last year, the Vice President launched the Standard Operating Procedure (SOP) and Ports System Support Portal (PSSP) in the nation’s maritime sector to make business transaction at the port seamless, so that at any time, one can look at any government agency and know their operational procedure. One year after, has that SOP been adequately deployed into the port business?   

Yes, I believe that to a reasonable extent, there is some progress made but like I have just said before, what is important is for my goods to arrive at the port, for me to go and pick it and come out because raw materials are not meant for the port even o be on the on the road. It is to be used in the factories. So, with all the technologies that had been deployed into resolving the issue, with all the measures that have been taken to improve the system, there is still basic infrastructure challenge.

Inter-agency exchange processing your papers and duties and so on, I think they have improved on those areas, I mean standardization of the process, it has been okay, we have really not have complains along those lines again, attention has been focused on single most important challenge that we have in terms of this movement. I have said also that there a major infrastructure issue, even having forklift, availability of relevance agencies to perform their roles, some say it is deliberate. So, there are a lot of issues that is still bedeviling the port. It could have been very interesting if we didn’t have gridlock so that we can effectively weigh the progress that we have made but I know, even when I ask some of my members what the issues are, well they will say forget about the other just clear the road first.

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