Dollar scarcity: Local meter producers may close shop

Dollar scarcity: Local meter producers may close shop

Dollar scarcity: Local meter producers may close shop

At a time when the need to boost local production is the talk of the town, local meter manufacturers are gasping for breath as foreign exchange scarcity is taking a toll on their operations, ’FEMI ASU writes

Following the privatisation of the power sector in November 2013, local meter manufacturing firms were buoyed up by the huge metering gap in the country, and invested to ramp up their capacity with the expectation of meeting the demand.

But today, that optimism is being dampened, with a number of them teetering on the brink of collapse as the severe foreign exchange shortage in the country has compounded their problems.

The manufacturers, who rely on importation for some of the components required for the production of meters, complained that it had become very difficult to access forex to order for those inputs.

They also decried the recent benchmark interest rate hike by the Monetary Policy Committee of the Central Bank of Nigeria from 12 per cent to 14 per cent, saying it would further increase the rate at which commercial banks lend to them.

The Managing Director and Chief Executive Officer, Mojec International Limited, a meter manufacturer based in Lagos, Chantelle Abdul, echoed the frustration of the manufacturers, saying, “One of our critical issues at the moment is the lack of access to foreign exchange. A lot of our manufacturing inputs rely on goods abroad. My goal as a manufacturer is to produce as much of my manufacturing input here in Nigeria.”

According to Abdul, some of the components being imported include chips, PCD, which is the brain of the meter, batteries, relays and capacitors.

“There is nothing that stops us from producing the batteries, relays and capacitors that we need. It is sad to say that we don’t even have factories that produce those things here in Nigeria,” she stated.

She said forex scarcity “is posing to be our biggest problem,” as it continued to hamper the ability of the meter manufacturers to import those components.

Financing still remains a big challenge, Abdul said, adding, “We cannot be borrowing at double-digit rate; it will automatically increase the price of the meter.

“Already, Nigerians are struggling to buy the meters, even the electricity distribution companies themselves. So, imagine doubling the price of the meter that already costs between N40,000 and N65,000; it means that we will not be able to bridge the metering gap that already exists in the country.”

Many electricity consumers in the country have continued to groan about the non-provision of prepaid meters by the electricity distribution companies, with complaints about estimated, or what is popularly called “crazy” billing still rampant.

Based on the proposals submitted by the core investors in the Discos during the privatisation of the power firms, 6.52 million new meters are expected to installed over the course of five years, meaning more than one million will be installed yearly.

But the Nigerian Electricity Regulatory Commission, while evaluating the performance of the Discos on the Credited Advance Payment for Metering Initiative recently, said the firms had performed poorly in terms of metering their customers.

As of March 2016, the Discos had collectively metered just 403,255 customers from the time the successor firms of the defunct Power Holding Company of Nigeria were privatised, with about three million currently without prepaid meters.

The Executive Secretary, Electricity Meter Manufacturers Association of Nigeria, Mr. Muyideen Ibrahim, said, “The challenges are really biting harder. We can’t produce as and when due. Forex is not readily available because manufacturers can’t be going to the black market to buy at almost N400 to a dollar.

“As we speak, over N50bn worth of investment from all of the manufacturers is just wasting away, as it were.”

He said aside from forex, poor power supply had been a major problem facing the manufacturers, who, according to him, rely almost completely on generators.

Ibrahim said, “You can imagine the impact of that on the manufacturers’ cost of production. This is making them unable to compete favourably with their foreign counterparts, especially those from China.

“The difference between China and Nigeria is that the Chinese government supports its manufacturers, because they have a good policy framework that is actually working. That is why some of the Chinese companies are saying, ‘We will give some of the Discos meters with one year moratorium before we start collecting money.’ No Nigerian meter manufacturer can do that.”

The EMMAN executive secretary said before the recent Monetary Policy Rate hike, commercial banks were lending to the manufacturers at 22-23 per cent interest rate.

Ibrahim explained, “We have five manufacturers registered with us, and each of them can produce at least 5,000 meters in a month. But now, there are no orders because some of the Discos are not patronising them. So, low patronage is another critical factor affecting the manufacturers.

“In fact, some of them have downsized because they are not producing optimally; their ability to service their loans is being threatened. When you are not producing to capacity, you will fold up eventually if there is no patronage.”

He said the government should give the manufacturers concession with respect to forex and a special intervention fund at a single digit interest rate to enable them to compete with their foreign counterparts.

This, according to Ibrahim, will bring about massive job creation, transfer of technology and contribution to the Gross Domestic Product.

“Another key thing that the government needs to do as a matter of urgency is to liberalise the metering arm of the power sector. There is no enabling law that says it is only the Discos that have the right to buy meters,” he added.

Individuals should be able to buy their meters themselves and take them to the Discos for them to be keyed into the systems before installing them, he noted.

Ibrahim stated, “Now, it is a win-lose situation. The Discos are winning because they have an edge on estimated billing, which is not favourable to the consumers. Whereas there are meters lying fallow in the warehouses of these manufacturers.

“The Discos are not willing to buy the meters, claiming that they don’t have money, and the consumers are suffering.”

The General Manager, Corporate Communications, Eko Electricity Distribution Company, Mr. Godwin Idemudia, told our correspondent that the local meter manufacturers could not meet the requirement of all the electricity distribution companies.

“So, what we are doing in Eko Disco is that we are importing and also patronising local manufacturers, who also rely on importation for some of their components,” he explained.

The Minister of Power, Works and Housing, Mr. Babatunde Fashola, who spoke during a tour of the factory of Mojec International in Lagos on Thursday, stressed the need for increased patronage of local meter manufacturers by the power firms.

“What I have come to verify is why we can have so much capacity to produce as the owners say, a million meters a year, and we still have quite a number of consumers saying that they don’t have meters,” he said.

Fashola, who indicated that the government would not force the power firms to patronise local manufacturers, said commercial issues should be done by persuasion, reason and the dynamics of the economy.

He said, “As the exchange rate begins to play in the real market, it will perhaps make sense to me as a businessman to say, ‘Why should I subject myself to such volatility? Why don’t I purchase locally when there is a big demand for the service; why should I wait seven or 14 days to ship them in?’

“I think we have made progress; it is to see how much more progress we can make. What are the things we can do? Can we find financing to support production and can we tie that to some form of delivery without necessarily burdening the consumers and the customers? Those are the things we will work out.”

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