Project – THE EFFECTS OF POWER OUTAGE IN NIGERIA

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The importance of electricity to economic development of any nation cannot be overemphasised.  Access to reliable electricity supply increases the productivity and welfare of society. To business enterprises, electricity serves as an indispensable input. Apart from its necessity for running many industrial machines, its contributions to the productivity of human capital are enormous. Virtually all business activities, especially industrial units, require constant and effective flow of electricity. Similarly, efficient functioning of electricity sometimes determines the comfort of workers and their productivity. A banker feeling serious heat due to lack of electricity to power fans or air conditioners for instance, may find it uncomfortable to attend to customers. This consequently reduces productivity. Besides serving as an input in production processes, electricity also contributes greatly to product marketing. In many cases, electricity plays important roles in storing finished goods ahead of demand, and therefore enhances consumers’ satisfaction by assisting in making the goods available to consumers when needed; this also helps in building firm’s image and protects firm’s reputation because customers can be assured of having their demand met.

Given the forgoing, it suffices to say that poor electricity supply or lack of quality and effective electricity service delivery is a bane to economic development. It restricts economic growth and development, as well as the socio-economic welfare of the people. Poor electricity supply affects business activities in many ways. First, it affects firm’s productivities as in many cases other inputs may be idle when there is no electricity to power them. The use of Information Communication Technology (ICT) for different purposes requires an effective and efficient flow of electricity. Addition to this is huge damage to materials and equipments that a power outage of long duration that occurs during production process may cause in some firms; an outage of about 40 minutes will cause molten ore in electronically heated ovens to harden. This may consequently damage the ovens, destroys the materials and also results in huge restart costs. More so, an outage of few minutes at an emergency unit of a specialist hospital may result in loss of many lives. Second, many firms rely on the use of the Internet to communicate their customers (e.g. emails), to advertise their products, and for electronic payments, which can only be efficient if there is effective electricity supply. Lastly, many raw materials and some finished products require constant flow of electricity for their storage, and any power cuts would result in huge business loss; this may have considerable effects on people whose livelihoods depend on the business.

Poor electricity supply has proved to be the major constraint to the business sector in Africa and has contributed to the low productivity and poor competitiveness of the manufacturing sector in the continent. Between 2006 and 2010, more than 50% of the Sub-Sahara African firms identified electricity as a major constraint to their businesses compared to just 27.8% which face transportation as the most critical problem (World Bank Enterprise Survey Online Database, 2012)

Constant Electricity Power supply is the hallmark of National development with electric emerges the people are empowered to work from the domestic level and the cottage industries through and large scale manufacturing complexes. In these days depriving people of electric power is tan tantamount to risk of losing potential investors and also prolong development.

The Power generation can be  through one of the following sources  of energy coal, oil or natural gas, hydro power  (water turbine), nuclear power (stream  turbine), solar-wind or water wave  turbine, solar thermal generator, solar voltaic generator, coal, oil, gas and hydro Power are  abundant in Nigeria. Presently  Nigeria Mostly employ gas fired and hydroelectric Power bring that oil is too expensive and coal-fired station have gone moribund the maximum Power  consumption or  peak demand depends on the population and industrialization of a country. If the maximum supply meets the peak demand there is a surplus otherwise there is a shortfall. However, in Nigeria, the Power supply system is run with a shortfall as demand tends to exceeds supply. The power holding company of Nigeria (PHCN) is responsible for generating, transmitting distributing and sells electric power to various consumers across the country. A major objective of PHCN naturally has been to provide regular and uninterrupted power supply to electricity consumer nationwide.

There has been study of power supply systems as well as various aspects of their  operations, however very few have investigates  and documented in learned journals  the counterpart (factor affecting) of the system in Nigeria. The establishment and the growth of electricity in Nigeria dates back as far as  1896 when it was first produce in Lagos,  fifteen years after its introduction in England (Niger. Power Review, 1985). The total capacity of the generation used then was 60KW. In other words the maximum demand in 1896 was less than 60KW  and then in 1946 the Nigeria government  electricity undertaking was established under the jurisdiction of the responsibility of (PWD) to take  over the responsibility of electricity supply in Lagos  State.  And in 1950  a central body was established by the legislative council which transferred electricity supply and development of the care of the body known as the electricity corporation of Nigeria (ECN). Other bodies like native Authorities and the Nigerian Electricity  Supply Company (NESCO) had  licenses  to produced  electricity in some locations in Nigeria. Another body known as Niger Dams Authority (NDA) which was established by an  Act of parliament the Authority was responsible for the construction and maintenance of dams  and other works on the River Niger  and elsewhere  generating  electricity by means of water Power, improving  navigation and promoting  fish brines and irrigation the electricity produced by NDA was bold  to ECN for distribution and sales at unity voltage.

In April 1972, the operation of ECN/NDA were merged in anew organization known as the National Electric Power Authority (NEPA) since ECN  was mainly responsible for distribution and sales and NDA was created to build and run-generating station and transmission lines, the primary aim for merging the organization were  (Niger Power Review 1989). The capacity in Kilowatt generated by each of the generating system in various part of the country (Nigeria) has also been studied. The work which also examined the Nigerian Electricity marked and found that the annual growth rate of electricity average about 18 percent  still had low electricity consumption of 60KWH capita (1979 figure) which is less than 1 percent of industrialized countries. The work however pointed out that the low consumption capita in Nigeria is due to the fact that over 80 percent of the population normally resides  in the rural area where they have no access to electricity as well as low level of industrialization. The solar and wind  energy resource in Nigeria was  investigated  and found that the annual mean of solar meter square  and global radiation is as high as 24mj per meter squared per day due to it good  geographical location latitude 4 degree and 14 degree north of the equator. Nigeria’s Power Company-Power Holding Company of Nigeria has an  installed  generating capacity of about 6GW but actual available output is less than 2.5GW Power  outage (black out) is frequent.

1.2 PROBLEM STATEMENT

Electricity as a source of energy is vital to the growth and development of any economy. Its significance arises from the impact it has on infrastructure, a range of socio-economic activities and consequently on the country’s standard of living. This means that transportation, communication, construction, and other facilities depend on electricity to function effectively. Electricity has continued to play a significance role in the development process. In the Nigerian situation the reverse appears to be the case  because Power outages have continued to affect the country’s  development. Some have argued that privatizing  electricity  supply through   the unbundling of power generation arm of National Electric Power  Authority (NEPA) Now  Power Holding Company of Nigeria (PHCN) will ensure  its  efficiency. Despite this reform, electricity supply I still rationed to the consumers in ways that are still grossly inadequate. In this project we want to see how power outage affects SMEs.

1.3    AIM AND OBJECTIVES OF THE STUDY

The main objective of this paper is to analyse the effect of electric power outage on the profitability and competitiveness of SMEs, using SMEs operating within the Kaduna metropolis as a case study. The specific objectives are:

1. To analyse the effect of power outage on Business in Nigeria.
2. To analyse factors affecting power outage in Kaduna Metropolis.
3. To analyse the effect of power fluctuations on the Return of Investment (ROI) of SMEs,

1.4 RESEARCH HYPOTHESES

HYPOTHESIS ONE

Hi: Power fluctuation increases the Return of Investment (ROI) of SMEs.

Ho: Power fluctuation decreases the Return of Investment (ROI) of SMEs.

HYPOTHESIS TWO

Hi: There is no significant rationing of power to the SMEs.

Ho: There is significant rationing of power to the SMEs.

1.5 SIGNIFICANCE OF THE STUDY

The study provides recommendations for governmental interventions in SME operations and for development of appropriate policy frameworks for the nation’s energy sector.

The finding and recommendations in this study will be of immense benefit to manpower planning, administrators and other power sector stake holders, in kaduna State in particular and Nigeria as a whole.

1.6 Scope of the Study

This study attempted to examine the effect of power outages in Nigeria among SMEs in Kaduna metropolis..

1.7 Definition of Terms

Operational terms were defined in this study thus:

POWER: This energy that is produced by mechanical, electrical, or other means and used to operate a device.

POWER OUTAGE: A power outage (also called a power cut, a power out, a power blackout, power failure or a blackout) is a short-term or a long-term loss of the electric power to a particular area. There are many causes of power failures in an electricity network.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows Chapter one is concerned with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.

Project – THE EFFECTS OF POWER OUTAGE IN NIGERIA