Impact of Electricity to Business and National Development
( a Study of Enugu Electricity Distributive Company Eedc)
CHAPTER ONE
OBJECTIVES OF THE STUDY
To highlight the specific challenges inhibiting SMEs in empowering them to drive economic growth of the Nigerian economy with a view to proposing some recommendations to help mitigate these challenges.
The specific objectives of this study are;
- To find out the effect of erratic power supply on the profitability of SME businesses.
- To find out the cost of alternative sources of power supply and its impact on the profit margins of SMEs.
- To examine the effect of erratic power supply on competiveness of SMEs
CHAPTER TWO LITERATURE REVIEW
INTRODUCTION
The literature review refers to aspects associated to the study of the effect of erratic power supply on SMEs profitability in the Enugu state Metropolis. It follows a specific arrangement. First, some definitions relating to SMEs are given, which is followed by the characteristics of Nigerian SMEs. Then comes the contribution SMEs make to the economic development and growth and also looked at other alternative sources of power supply for SMEs to enable them grow and expand. Attention is also given to the effect of the erratic power supply on the cost of production pattern and the competitive environment of SMEs in their quest for growth and expansion in the Metropolis.
CHARACTERISTICS OF SMEs IN NIGERIA
The role of SMEs as a vehicle for economic self-sufficiency cannot be over-stressed. They play a massive role in terms of employment creation, provision of goods and services at reasonable costs and justifiable growth as a whole as it is in other nations.
SMEs are seen as “the bedrock of entrepreneurial activities and the backbone of economic development in most economies. In Nigeria, SMEs are seen as playing an important role in the transition from a state-led to private oriented development strategy” (Aryeetey et al., 1994). SMEs “provide employment and incomes to a large portion of the population and are significant source of total output” (Aryeetey, 2001).
According to Steel and Webster (1991), “the small enterprise sector provides about 85 percent of businesses in Nigeria and contributes over 70 percent to the Gross Domestic Product of Nigeria”.
In India, SMEs contribute nearly 45percent share of manufactured products, 40percent of overall export of the country and employment to over 32million people and produce more than 8,000 quality products for the Indian and international markets.
In West africa, “SMEs contribute 30percent to GDP, 70-80percent in employment. SMEs have been the engine of Europe’s economy during the period of the Eurozone crises accounting for 80percent of the European jobs in the last 5 years” (Arkoh, 2013). This goes to prove that “for Nigeria to attain economic self-sufficiency it desperately seeks then SMEs must be the focal point of major government policies to develop the economy. The high degree of unemployment in the country combined with the relatively lower standards of living can be reduced if SMEs are given the necessary support to expand and overcome the numerous challenges that they face. This will go a long way to accelerate our vision in attaining economic self-sufficiency” (Arkoh, 2013).
CHAPTER THREE
METHODOLOGY
INTRODUCTION
This chapter looks at how data of the research were gathered, the research method employed in the study, the data collection techniques used and the target population, the sample size and sampling technique as well as the data analysis method employed. It finally looks at the procedures and the limitations faced in gathering these evidence.
DATA PRESENTATION ANALYSIS AND DISCUSION OF FINDINGS
INTRODUCTION
In this research, we describe the constraints and performance of businesses in the context of erratic power supply and its effect on businesses in the Nsukka city. Further, we quantify and explain how a business in the Nsukka Business Districts’ performance is related to some of their characteristics, as well as to some characteristics of the environment in which they are involved. The study is cross-sectional in its design. Data are collected on a sample of businesses, with 2012 as the reference year. After a descriptive analysis of the information obtained, we proceed with an econometric analysis to evaluate how businesses’ productivity are related to the erratic power supply in the country.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
INTRODUCTION
This chapter gives a summary of the findings of the study, draws conclusion and makes recommendations. Summary of findings is first followed by the conclusion.
SUMMARY OF FINDINGS
Findings from the study revealed that SMEs in the Nsukka city of Nigeria suffer from erratic power fluctuations either announced or unannounced, and these have adverse effect on the profitability of most of the SMEs surveyed. Lack of a consistent access to reliable power costs businesses and the economy as a whole. Even with access to energy, unreliable power makes operating a business even more challenging than usual. African manufacturing enterprises experiences power outages 56 days a year on average. As a result, firms lose six percent of sales revenues in the informal sector. Where back-up generators are limited, losses can be as high as 20 percent. These losses have severe consequences for the health and growth of the wider economy, not to mention the dramatic impact in achieving other development objectives outlined by the Millennium Development Goals.
The study further found out that the energy situation in the country currently is as a result of a systemic failure by various institutions responsible for power supply; because they haven’t invested consistently enough neither have they planned well nor addressed the issue of demand on power and energy consistently enough in the power sector over the past years.
The above thoughtful statement amply addresses the reason/s why we have this erratic power supply in this country today.
Findings from the research also revealed that the consistent power outages experienced by businesses in the country has taken a major toll on the business environment, especially the manufacturing sector. Due to the energy situation, the manufacturing sectors of the economy grew by an unprecedented negative eight percent; because of decreased volume of output which ultimately resulted in low profit margins which have affected government revenue accruing from the sector.
Findings also revealed that many small and medium enterprises (SMEs) in Nigeria who are involved in electricity powered processes are compelled to find alternative means of power supply. The impact of the power crisis is that the extra funds spent on the alternative sources of power supply increase the cost of production thus raising the market costs of products and services. This has made the products to underperform in the market since similar products in the market that have been imported from countries where the power supply is regular. In order for SMEs to survive under this worsening power situation which has compelled most small and medium enterprises to cut down costs as much as possible to remain competitive in business has resulted in laying off some of workers for a while or reduce working hours so as to cut down costs of labour in cycle with the high costs of securing alternative power.
Findings from the research brings out the effect that erratic power supply is having on cost of energy, raw materials for production due to the instability of micro and macroeconomic indicators in the country currently. The result is the high interest rates which are stifling the productive sectors of the economy as it makes the cost of doing business too excessive and businessmen can’t pass the benefits of their business to consumers in the form of lower prices. Businesses in these sectors such as agriculture and manufacturing are unable to borrow to expand their businesses and this is worsening the unemployment situation in the country and the few who are employed cannot enjoy the fruits of their labour in the form of higher wages all because of the high cost of doing business.
CONCLUSION
Generally the study sought to find out the negative effect of erratic power supply on the profitability of SMEs in the Central Business District of Nsukka. The intermittent and unreliable nature of the electricity supply has affected the operations of small and medium enterprises which depend on electricity generated from the national grid for their operations. This indicates that there is the need for reliable and sustainable alternative source of energy to power small and medium enterprises for economic growth. The study used 80 structured questionnaires to collect primary data directly from some selected SME owners to supplement secondary data from literature.
The study revealed that access to reliable and sustainable electricity means that small and medium businesses, such as hair salons, bakery and welders, all of which rely on energy to function which also leads to the creation of new markets, businesses and job openings, which provide more opportunities for individuals to earn an income and lift themselves, their families and communities out of poverty. For SMEs to promote economic growth and development of the country, it is essential for them to have access to reliable energy and at an affordable cost because energy is a necessity to their operations and productivity.
This research agrees with the works of (Wang, 2002) with several other researchers who affirm that intermittent and frequent power outages cause severe harm on SMEs profitability.
By focusing on SMEs, this study seeks to contribute to the body of knowledge on the negative effect of erratic power supply on the profitability of SMEs.
RECOMMENDATIONS
The study revealed that the erratic power supply has negatively affected the profitability of small and medium enterprises (SMEs) by way of increase in production cost and reduce profit.
The study therefore seeks to recommend that solar panels should be installed by the government for small consumers of power such as hairdressers, barbering shop and dressmakers to enable their businesses operate without any setbacks from energy crisis and also strategic power plants should be constructed for medium scale industries use.
Furthermore, tax rebates or incentives should be given to SMEs to keep them in business in order not to lay off workers which has the potential of coursing social problems in society.
Finally, government should also encourage competition in the power sector, rather than the monopoly of Electricity Company of Nigeria (ECG) is currently enjoying. We need to be proactive and embrace these renewable energies as quickly as possible as they will lead to decentralization of power supply, create more jobs, lead to lower costs, cleaner environments, and reduce our carbon footprint, thus helping to save our planet. They will create wealth for private providers. The owners of these power sources will not have to deal with ECG or VRA directly as they will be in control of their power sources. Thus, there will be no bureaucracy and power outages. The scarce resources of government will be freed for more urgent needs.
It is the hope that the recommendations made will help improve the energy situation and lasting solution to the energy crisis and also the study will serve as a stepping stone for further research.
REFERENCES
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- Adomako, A.K. (2007).Energy Crisis, Half Truths and the Blame Game,
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- Akuffo, F.O. (2008). “Nigeria’s EnergyResources Options: Issues for the Development and Utilization of Renewable Energy Resources in Nigeria”, in Energy and Nigeria’s socio- economic Development, Development and Policy Dialogue Report One, George Benneh Foundation, Accra, Pg 18-31.
- Alam, A. (2003). Electric power consumption, foreign direct investment and economic growth. A competitive study of India and Pakistan. World Journal of Science, Technology and Sustainable Development, 10(1), 55-65.
- http://dx.doi.org/10.1108/20425941311313100
