INFRASTRUCTURE. The basic physical and organizational structures that are needed for the operation of a society or enterprise

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2 INFRASTRUCTURE The basic physical and organizational structures that are needed for the operation of a society or enterprise 2

3 INFRASTRUCTURE INCLUDE Roads Canals and Irrigation systems Water Supply Power Supply Telecommunications Waste management facilities etc 3

4 POWER SUPPLY ELECTRICITY 4

5 INDUSTRIAL SOURCE OF POWER 99.9% of Power Consumed in Nigeria is derived from ELECTRIC POWER 5

6 INFRASTRUCTURAL SURVEY (Prof. Adenikinju) Land Electric power Water Telecommunication Road network Petroleum shortages 6

7 ELECTRIC POWER SUPPLY FROM PHCN INADEQUATE UNRELIABLE POOR QUALITY 7

8 RESPONSE STRATEGIES Self Sufficiency Stand by Private Provision Public Source as Stand by Captivity 8

9 EXTRA COST IMPOSED BY PHCN Huge costs of providing own generating facilities. Cost of providing power correcting equipments. Idle workers Spoiled raw materials Lost output. Fail delivery dates Damaged equipment. Re start costs and back up costs Stress related health problems for the entrepreneurs. 9

10 AVERAGE COST DIFFERENTIAL IN NIGERIA UNDP/World Bank Survey. 16% 30% 10

11 COST DIFFERENTIAL (MAN Survey 2009) Regular electricity from PHCN #18.00 per unit(kwh) Through own generation #36.00 per unit (kwh) 11

12 ELECTRICITY COST AS A PROPORTION OF TOTAL PRODUCTIO COST (MAN Survey 2009) Nigeria 30 % 35% Other Countries 5% 10% 12

13 PRODUCTION COST IN NIGERIA 9 times the cost of producing the same item in China 4 times the cost in Europe and South Africa 2 times the cost in Ghana 13

14 PRODUCTION COST OF 1 TON ALUMINIUM PRODUCT Nigeria = $ Other parts of the world= $

15 INVESTMENT IN GENERATING EQUIPMENTS (Prof. Adenikinju Survey) 93% of firms own generating sets A firm owns minimum of 2 sets Ages of sets 1 24 years Value of sets up to #30million Mean capital #1.54 million Mean operating cost #1.5 million p.a. 15

16 MEAN COST STRUCTURE OF ELECTRIC GENERATION TO MANUFACTURERS. Item Value (#) CAPITAL ITEM Capital cost (generator) 1,500,000 Generator House 273,863 Stabiliser 21,772 Oil tank 126,689 Others 235,466 Total 2,157,790 OPERATING COST Fuel and grease 1,076,460 Wages and Salaries 112,688 Maintenance Costs 323,508 Others 9,036 Total 1,521,692 16

17 DEMAND/SUPPLY TO MANUFACTURERS Current Demand of Manufacturers 2500 MW Supply from PHCN 267 MW Short fall in Demand 2233 MW Private Generation through installed power plants 597 MW 17

18 PROJECTED DEMAND ,000 MW 18

19 FUEL CONSUMPTION 8.7 Million litres per week = N= 903 Million per week = N= 3.6 Billion per month 19

20 PROPORTION OF TOTAL INVESTMENT AT START DEVOTED TO SELF GENERATION Manufacturers Small Scale Medium Scale Large Scale 0 10% % % More than 30%

21 INADEQUATE INSTALLED CAPACITY ECN > NEPA > PHCN Year Installed Capacity (MW)

22 P0WER GENERATION AS AT JUNE 2009 S/N PLANT INSTALLED CAPACITY (MW) OUTPUT (MW) 1 Egbin/ AES 1, Kainji Shiroro Sapele Geregu Olorunsogo Jebba Omotosho Afam 1, 2, 3, Total 5,673 1,383 22

23 ELECTRICITY SUPPLY IN OTHER COUNTRIES Country Population Installed Electricity Generation Capacity (MW) Peak Demand USA 300 million 900, ,000 China 1.3 billion 650, ,000 South Africa 45 million 42,000 38,000 Brazil 186 million 96,294 87,000 United Kingdom 57 million 74,000 55,000 Ghana 23 million 4,000 3,900? Nigeria 140 million 5,482 35,000 23

24 . Country Brazil South Africa Nigeria Transmission Capacity 100,000 MW 40,000 MW 4,000 MW 24

25 TRANSMISSION LOSSES Nigeria 35% Developed countries 7% 25

26 CLASSIFICATION OF COUNTRIES ECONOMICALLY DEVELOPED and UNDERDEVELOPED (Politely referred to as developing ) 26

27 MANUFACTURING CONTRIBUTION TO ECONOMY Developed Economy GDP is 25% Total Export is 80% Total workforce is 30% Compare Nigeria 4.13% 7.6% to non oil export? 27

28 In developed countries therefore the manufacturing sector is The engine of growth necessary for sustained development. An important contributor to wealth creation. An antidote for containing unemployment. 28

29 SOME FACTS Membership of Manufacturers Association of Nigeria (MAN) Growth rates recorded for the manufacturing sector within the last 10 years have been low(much lower than inflation rate) In fact, in June 2008, the sector recorded its worst performance with a NEGATIVE growth rate of 1.93%. Many factories have been forced to close down in many parts of the country due to Infrastructural problems. In Kano alone, about 400 industrial establishments have closed shop. 29

30 . Many Large and strategic Industrial establishments were forced to close down Dunlop Michelin Many Textile Companies Within the last five years casualties to retrenchment number over 1 million It is estimated that over 800 companies, including multinational, have relocated all or part of their manufacturing facilities outside Nigeria where they can get a more reliable power supply. Coca Cola s only concentrate factory in Ogun State to Switzerland in 1998 Nestle & Unilever have made similar arrangements recently, I understand. 30

31 . For those still in production capacity utilization has dropped steadily from a high of 80% in the 1980 s to below 30% in to 20 years ago our peers in the league of Underdeveloped Nations have left us behind. Countries like India, Brazil, Indonesia and Republic of South Africa have acquired higher status by enhancing their manufacturing capabilities. 31

32 SOLUTION THE BRAZIL MODEL 32