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Manufacturers in Nigeria threaten to close shop due electricity shortages

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It’s Nigeria’s first pharmaceutical industry but in its over six decades of opening shop in the country, May and Baker has never had this bad with electricity. Not because it relies on public power supply to keep its factory running, far from.In fact, the company has always relied on its own gas-fired turbines to keep its production running. But lately, the gas plant has ceased working. The head of the firm, Nnamdi Okafor, says that is already having a telling impact on production.

“As it is today, we are running our factory at less than 50 percent capacity utilization. In the first place, we have never ever depended on public power supply. We always had our plan for electricity. And that plan was running on liquefied natural gas. In the past six weeks when the militants started blowing off pipelines, we have found we could not have access to gas. So our power supply failed. So what we have done is to fall back on our plan B, which is a 1000KVA generator but unfortunately that cannot carry the whole facility so we now have to run on less than half our installed capacity and that is actually devastating because you have some fixed cost that you must run and when your output comes down by 50 percent, then you can imagine the impact that would have.” said Nnamdi Okafor, Managing director, May&Baker Nigeria

It’s virtually the same story for literally every manufacturer in the country. So bad is the power situation in Nigeria that from a high of 5000 megawatts in February this year, it dropped to an unprecedented low of 0 megawatts in the last day of March; authorities putting the blame squarely on vandalism.
And it’s not just the lack of electricity local manufacturers are having to struggle with; there is also the problem of access to foreign exchange to import raw materials. With the country’s central bank introducing tighter forex controls to stave of pressure on the naira, manufacturers like May and Baker say their operations are now being threatened.

“Some letters of credit that we have established and received consignment for and used, we are not even able to pay. So that has rubbished our reputation for our foreign suppliers. As far as they are concerned, it’s the company they know and if they cannot get their money, then there is no way they would be willing to supply you in future. So we have burnt a lot of bridges. To even get fresh supplies is impossible.”said Nnamdi Okafor, Managing director, May&Baker Nigeria

While May and Baker is still managing to keep running and keep its 800 workforce, it says it might to forced to downsize if the situation degenerates further. Already about three Phamaceutical companies in Lagos are closing shop with the owners putting them up for sale finding the current business environment unbearable.

Nigeria is on the brink of a recession. And local manufacturing is hard hit The country posted a negative GDP in the first quarter. Some experts have said it will only take miracle for the country to miss a recession by the time the next GDP figure are released. The government is negotiating with militants to end the pipeline bombings. But so far it is not making any headway. It seems things making get worse for Africa’s largest economy before they get better.

 

 

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