Epileptic Power Supply And Small Business Performance In Nigeria

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Epileptic Power Supply And Small Business Performance In Nigeria


Abstract


Epileptic power supply has been identified as the key constraint to manufacturing sector development in Nigeria. Hence, this study analysed the effect of epileptic power supply on the performance of SMEs using both a survey technique and regression analysis. One strong outcome of the study is that the poor state of electricity supply in Nigeria has imposed significant costs on the manufacturing sector. The bulk of these costs relate to the firms’ acquisition of very expensive backup capacity to cushion them against the even larger losses arising from frequent and long power fluctuations. Small- scale operators are more heavily affected by the epileptic power supply as they are unable to finance the cost of backup power necessary to mitigate the impact of frequent outages. The small-scale operators that could afford to back up their operations have to spend a significant proportion of their investment outlay on this. The study suggests for institutional reforms of the power supply sector inNigeria.


Chapter One


1.0 Introduction

1.1 Background of the Study

Small businesses are now increasing being perceived as an important contributor to economic growth and development. They make significant contribution towards job creation and the provision of low cost goods and services

Over the last decades, there have been a number of changes in the way global business is conducted which the changes include the liberalization of trade, expansion of regional economic integrations and advances in information communications. While these changes have taken place, the importance of small businesses still remains an integral component of the overall economic activities (Reddy 2007).

Epileptic power supply is a situation where by there are poor power outages in an area over a given period of time which at times it may take the form of low voltage, when there is supply at all. This can arise from either the generating or transmitting end, but is ultimately felt at the utilizing end and any nation that is always confronted with an irregular supply of electricity is always retarded in development and risk to investors.

Small business owners and manufacturers have rightly complained that any interruption in electricity supply is bound to have negative effect on their output. Residential users of electricity have complained that power outages can affect their electrical /electronic appliances small and medium scale business users of electricity have admitted that interrupted electricity is the bane of the smooth running of their businesses. Therefore, there is no human’s of our socio-economic life that is not affected by the electricity supply.


1.2 Statement of the Problem

Small businesses performance in Nigeria is threatened by the situation of poor power supply in Nigeria. The situation is very serious due to the high cost of depending on fuel and operating the business with generators and poor plants instead of using the funds to buy more goods and services to grow their businesses. Constant power outages is rampant in Nigeria, many companies are relocating from Nigeria to other countries due to the situation. The consequence of this situation is job displacement and high level of poverty and unemployment and in addition, many potential entrepreneurs are discouraged from starting up small and medium enterprises (SMEs) due to the unfavourable condition.

Government policies on the promotion of small scale business is not effective due to the poor electricity supply in Nigeria. It is in view of these problems that this study is set to examine epileptic power supply and small business performance in Nigeria.


1.3 Objective of the Study

The general objective of this study is to examine the impact of epileptic power supply to small and medium Enterprise in Nigeria.

The specific objectives of this study include the following:

  1. To find the prevalence of epileptic power supply among manufacturing organization.
  2. To ascertain the influence of power outrage on the productivity electronics enterprise.
  3. To examine the influence of power outrage on customers’ satisfaction.
  4. To determine the cost of alternative sources of power supply and its impact on the profit margins.
  5. To examine the effect of epileptic power supply on competiveness of electronics enterprises.

1.4 Research Questions

  1. What is the prevalence of epileptic power supply among manufacturing organization?
  2. What is the influence of power outrage on the productivity?
  3. What is the influence of power outrage on customers’ satisfaction?
  4. What is the cost of alternative sources of power supply and its impact on the profit margins?
  5. What is the effect of epileptic power supply on competiveness?

1.5 Significance of the Study

The study will be useful to the state government and the federal government on the importance of adequate power supply and it will help to identify the impact of epileptic power supply in Nigeria and proffer recommendation on solving the problem. It will also serve as a reference material to other scholars/researchers and individuals seeking for information on the subject.

It will add to the available literature on the areas of study while also providing the platform for other researchers to further this study.


1.6 Scope of the Study

This study covers epileptic power supply and small business performance in Nigeria, using selected small and medium scale enterprises in Uyo as case study.


1.7 Limitations of the Study

In the course of carrying out the research some challenges were countered by the researcher that stood as limitation to the study and they include; the researcher could not visit many libraries to gather relevant information due to high cost of transportations.

Limited time given for the completion of the study and financial challenges due to the rising cost of textbooks, internet browsing, etc.


1.8 Definition Of Terms

Epileptic Power Supply

A situation of irregular supply of electricity.

Power

Electricity made available for use.

Business

A company or other organization that buys and sells goods, makes products, or provides services.

Performance

Working effectiveness; The way in which somebody does a job, judged by its effectiveness.

Small and Medium Enterprises (SMEs)

Is a business segment term that is used differently in different countries, and sometimes differently in different industries in the same country – It means, small and medium sized Enterprises in full, are companies whose turnover or head count falls below certain limits.


1.9 Organization of Study

The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.


Chapter Five


Conclusion and Recommendation

5.1 Conclusion

This study analyzed the impact of epileptic power supply on small and medium enterprises in Nigeria. The study applied survey technique. One strong outcome of the study is that the poor state of electricity supply in Nigeria has imposed significant costs on the business sector of the Nigerian economy.

The bulk of these costs come in the form of acquisition of very expensive backup power. However, the decision to acquire a backup is actually a rational decision on the part of the firm in order to insure it from larger losses arising from frequent and long power fluctuations.

The continuation of the existing state of power supply will no doubt continue to have a negative impact on the attempt by the government to diversify the production and export base of the economy away from oil. A situation where firms spend as much as 25% to 40% of initial investment on the acquisition of facilities to enhance electricity supply reliability has a significant negative impact on the cost competitiveness of the manufacturing sector.
Furthermore, as the results of our analysis have shown, small-scale operators are more heavily affected by the infrastructure failures. In many instances they are unable to finance the cost of backup necessary to mitigate the negative impact of frequent outages. Hence, they have to bear the full burden of electricity failures. Small-scale operators that could afford to back up their operations have to spend a significant proportion of their investment outlay on this.


5.2 Recommendations

Based on the result obtained from the research work and conclusion drawn, the following recommendations will put more emphases on increasing the level of power supply in Nigeria.

  1. Government should increase its funding of the electricity sector to at least 15-25 percent on annual budget. This is also in recognition of the fact that government expenditure are constrained by scarce resources available to its executing budget. But the upward review of funds to the power supply and small scale enterprise sectors has the capacity of generating a great impact in terms of economic growth. Therefore, priority should also be given to power supply sector.
  2. For small and medium scale enterprise survive in the Nigeria business environment that is becoming more and more competitive, it has to apply the result of scientific and technological revolution in its production. In other to progress, there is the need for investors to acquire technology know how, in Nigeria for instance, the national office of industrial property (NOIP)
  3. There is also a need for an opening of the market for greater competition in the supply and distribution of power. Increase in the levels of competition would yield quality and efficiency in supply and service delivery. Since 1962 till date, the electricity supply market has not been opened up to competition. It has been dominated by a state monopoly, Electricity Distribution Companies of various states. However, a more competitive environment, where features such as price, efficiency and service quality would characterize the criteria for operation would contribute to the reliability in power supply.
  4. After looking through the problems and all the inefficacies of Electricity Distribution Companies, we draw conclusion that because of these set back in the power sector, it has a negative effect on productivity. This is because of the cost of doing business when there is epileptic power supply. The challenges for policy options towards attainment of sustainable thus including putting in place measures that will successfully address the demand and supply constraints. The measures should also facilitate the adoption and implementation of specific renewable energy resource such as solar for areas where the national grip system could not reach or not economically viable.
  5. The study recommends that regulatory bodies responsible for the energy sector must set some standards for the generation, distribution and costing of electric power where preference would be given to key sectors of the economy such as SMEs since they are known to provide jobs for a large number of people and contribute significantly to the economic growth of the country. Standards in the distribution of power are also critical to ensure continuous supply of power to industries. Two approaches for setting standards are recommended. Firstly, there is a need for the setting of a penalty for each standard power distributor that does not meet the required supply level agreed. Such penalties would be effective if they are compulsory and automatic (Waddams et al., 2002). Secondly, it is essential to create incentive scheme to reward power distribution companies’ that ensures the standards are being maintained and also eliminate the waste in energy supply (Bowdery, 1994).
  6. The government and other policy makers would have to place greater emphasis on facilitating equity capital. Equity capital provides a base for further borrowing, reduces businesses’ sensitivity to economic cycles, and provides SMEs with access to syndicates of private and institutional venture capital suppliers. There could also be policies aimed at encouraging SMEs to access public equity capital through the reduction of listing requirements and subsidizing flotation cost. These policy prescriptions could go a long way to improve Nigerian SMEs’ access to long-term financing to spur up growth.

Epileptic Power Supply And Small Business Performance In Nigeria


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