NSDC boss targets high electricity costs, logistics delays for Nigerian factories

• Nigerian manufacturers pay significantly higher production costs than their counterparts in Vietnam and China.
• The NSDC has identified four key targets to improve industrial competitiveness: power, lending, port clearance, and output per worker.
• Implementing these targets could transform Nigeria's manufacturing fortunes and make the country a major player in the region.

When a country prices inputs as if it wants industry to live, industry lives

Nigerian manufacturers are facing a significant competitive disadvantage due to high production costs. According to the National Sugar Development Council (NSDC), the country's factories pay between two and 10 times more than their counterparts in Vietnam and China for electricity, credit, and logistics. This is not a demand problem, but rather a cost-of-production issue that can be addressed through targeted interventions. The NSDC has identified four key targets to improve industrial competitiveness: power delivered to industrial clusters at 8-10 cents per kilowatt-hour, industrial lending in single digits, port clearance within seven days, and output per worker doubled by 2030.

The NSDC's targets are aimed at addressing the high production costs that have been a major challenge for Nigerian manufacturers. The country's industrial electricity costs are significantly higher than those in Vietnam and China, with prices ranging from 15 cents to nearly 30 cents per kilowatt-hour. This has resulted in Nigerian manufacturers spending an estimated ₦1.34tn generating their own electricity last year. The World Bank's Logistics Performance Index also ranks Nigeria 88th out of 139 countries, highlighting the need for improvements in logistics and port clearance times.

The high production costs faced by Nigerian factories have significant implications for the country's manufacturing sector. With the African Continental Free Trade Area (AfCFTA) set to increase duty-free access to 1.4 billion consumers, Nigerian manufacturers must be competitive to take advantage of this opportunity. The NSDC's targets are timely and consequential, given the government's macroeconomic reforms that have delivered stability and created conditions for factories to plan and invest. If implemented effectively, these targets could transform Nigeria's manufacturing fortunes and make the country a major player in the region.

Lawyers advising clients in the manufacturing sector should watch for potential compliance exposures related to the new targets outlined by the NSDC boss, including the need for industrial clusters to receive power at 8-10 cents per kilowatt-hour and port clearance within seven days.

Source: Original reporting via PUNCH Online