Scarcity and high cost of natural gas is constricting the operational results of manufacturers as the nation grapples with a stifling short supply of gas.
This, BusinessDay gathered, has consistently reduced the capacity utilisation of such companies and resulted in their low performance.
Gas cuts have paralysed manufacturing activities in Ikeja industrial district, leading to the closure of Phoenix Steel, last year. The persisting and prolonged disruption, buttresses BusinessDay�s prediction in January that the issue, if not addressed may lead to job losses and more company closures before the end of first quarter of the year.
Already, the strain is showing in the performance of companies like LAFARGE (former WAPCO) makers of Elephant Cement. One of the companies in the district hinged its losses last year on gas cuts, as its operating result for the year was adversely impacted by repeated and prolonged disruption in the supply of natural gas to its production facilities. This resulted in a 13 percent drop in the cement despatched compared with the volume achieved in 2006. Similarly, its profit stood at N11.665-million in 2007 as against N12.119-million in 2006.
Many other companies within the district, BusinessDay gathered, are also ruing their losses for the same reason, but prefer to be silent, for fear of victimisation from the Nigeria Gas Company (NGC), responsible for natural gas distribution in the country.
An executive of one of the affected companies who spoke with BusinessDay said, �We are all experiencing power problems, not only LAFARGE, but most of us are scared to open up for fear of sanctions or victimisation from the authorities.
�It will look as if we are fighting government. You do not fight a finger that feeds you,� the sourced said.
For Livestock Feeds plc, Nigeria�s foremost feed producer, not much was done by government to improve the fortunes of the sector, as the decay in infrastructure continued unabated.
Matters were equally not helped by the frequent scarcity of diesel often purchased at very exorbitant cost, and this has spurred fuel price increases by government which invariably drove up cost of goods and services including transportation, says Robert Tade, chairman of the company.
For Berger paints, the overall capacity utilisation dropped from 46.5 percent in 2003 to 44 percent in 2004 as a result of increase in the crude oil price which drove inflation upwards. The result of the inclement economic climate was characterised by poor infrstructure, especially energy, roads and transportation.
De-United Company, makers of indomie, revealed that it spends about N40 to N50 million monthly on gas and diesel in two of its factories to generate private power from gas.
Even the Power Holding Company of Nigeria (PHCN) has over the years complained of shortage of gas as the major reason there has been disruption in power supply in the country.
For domestic use, a 12.5 kg of cooking gas costs between N5, 000 and N7, 000 as against the normal price of between N1,500 and N2,500.
BusinessDay projected early in the year that the power issue may scuttle government�s efforts at rejuvenating the real sector, regarded as the only answer to the country�s economic survival.
This looming scenario is made almost inevitable by the tougher times which await the sector in the year, occasioned by the constant increase in the price of diesel and the frequent gas cuts that have crippled power supply.
Consequently, stakeholders in the sector are of the opinion that the situation, which paralysed production activities in the greater part of 2007, may result in job losses as well as factory closures in the New Year, if the issue of power is not addressed urgently by the government.
�It is already affecting our members and people will definitely be thrown out of jobs, factories will close and there will be crisis in the country,� said Adeniyi Ogunsanya, vice president, Industrial, Small and Medium Industries of the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).
Ogunsanya, also the managing director of Tropical Paints Limited, said that the development is an indication that the country is not yet serious with project 2020, a programme geared towards launching Nigeria in the top 20 bracket of the most developed countries of the world.
�This is the right time for President Umaru Yar�Adua to declare the state of emergency that he promised at the beginning of his tenure. The 2020 goal will be a mirage if the electricity problem is not tackled. And to make matters worse, the Nigeria Gas Company has not even helped matters by declaring that they are only distributors and not producers of industrial gas.�
According to the gas company, �what we get is what we distribute�. They have also said they will need about N480 billion to meet local demand of the product,� Ogunsanya noted.
Also in a telephone chat with Business Day, Bunmi Ogunpola, a senior manager with Winners Pharmaceutical Industries Limited, said the development is already affecting them negatively, as it has further driven up their cost of production, as a result of their reliance on diesel.
�Consumers are to bear the brunt of this as all local manufacturers are affected, and to stay in business, we will mark up our prices,� Ogunpola said.
Business Day investigations revealed that apart from Phonix Steel, which has remained closed, most factories located at the Ikeja area of Lagos, south west, Nigeria, shut factories sometimes in 2007 due to gas cut, which occurred regularly at different periods of the year.
The switch from diesel to gas as an alternative power source was a relief to some privileged manufacturing companies in Lagos, a development which did not last as a result of the unreliability of gas supplies attributed to pipeline vandalism among other reasons.