While the Central Bank Governor was speaking at the Zenith Bank International Trade Seminar in Lagos yesterday, explaining how improving non-oil exports can boost the economy, the Eko Electricity Distribution Company (@EKEDP) tweeted that the National Electricity Grid had collapsed again.
Coincidentally, this was at about the same time that the Nigerian Senate was passing the 2022 Electricity Bill which would “reinvigorate the institutional framework for the reform of the Nigerian Electricity Supply Industry initiated and implemented by the Federal Government” according to Senator Gabriel Suswam of Benue North East.
This grid collapse and the subsequent blackout is occurring after an estimated five weeks since the last national grid collapse on June 12, 2022. Before that was the collapse on May 10, 2022, and before that were similar incidents on April 9 and March 14, 2022. On average, each of these national grid collapses threw the country into blackouts of about 4 to 5 days.
How this is affecting small business owners
Chinedu runs a printing and photocopy centre alongside a stationery shop. He told Smartpreneur that he gets about 4 hours of electricity supply on a regular day, thus leaving him to operate the remaining hours of the day on power from his generating set.
“On average, I spend like N3,000 on fuel on a normal day, but once the blackout occurs, I have to spend at least double that amount to stay powered for the day,” he said.
For a small business to spend as much as N75,000 on fuel on a supposed regular month when there is no grid collapse, and about 30 percent more if there is a total blackout for as much as five days, one can only imagine how much would be left as profit.
Mrs. Rolake Taiwo runs a frozen foods business around Yaba, Lagos, and electricity is key to preserving her products. She estimates that she would spend about N12,000 on fuel to stay powered on when there is a national blackout.
“It is not a matter of whether the customers are coming or not. If there is no power, everything will get spoilt,” she explained.
Seeking alternative sources
Due to the epileptic power supply and unexpected grid collapses, small business owners who want to stay in business must seek out alternatives. But at what cost?
Most businesses opt for power generating sets that run on petrol and diesel, keeping them exposed to fluctuating prices and fuel scarcity. Besides the cost of fuel, they also spend heavily on regular maintenance and repair of the generating sets. These tend to eat deeply into their profit margins or translate into pricing their products higher as they seek to shift some of the operating costs for their business to their customers. The few businesses that can afford it choose to go for solar power systems that are more environmentally friendly and that cost less to run and maintain in the long term. However, this is a highly restricted option due to the high capital requirements of setting it up.
What this is costing the economy
Higher operation costs translate into higher prices for consumers, thus pushing the inflation index higher up. This also eats significantly into business revenues and capital, increasing the percentage of SMEs that are likely to fail.
In April 2021, officials of the World Bank stated that Nigerian businesses suffer an annual loss of $29 billion as a result of unreliable electricity. If they were to release the numbers for 2022, we could be looking at a much higher figure.
For most economies in the world, SMEs are the engine, providing revenue, employment opportunities and sustainability for the economy. Small business owners need a more suitable environment to do business, and reliable power is a big part of that ideal environment.
