The Impact Of Electrical Power Outage On The Operational Performance Of Small Scale Industries

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The Impact Of Electrical Power Outage On The Operational Performance Of Small Scale Industries


Abstract


Electricity provision in Nigeria has been marred by low generation, poor supply and frequent power outages. The situation has compelled firms to adopt strategies to cope with this poor public supply of power for their business. To this end, this study analysed the effect of power outage on the performance of small scale industries: The study employed questionnaire for data collection. Data collected was analysed using frequencies and percentages and the two hypotheses tested using chi-square. The results show that, the presence of power outages in Kano state negatively affected firms’ performance (profitability). The study therefore recommends that government should implement policies and programs such as power mix approach and renewable energy and bring in private sector participation to install competition and efficiency.


Chapter One


Introduction

1.1 Background of the Study

Nigeria is hugely endowed with energy resources that include oil, natural gas, coal, biomass, solar, wind and hydro resources among others (Iwayemi, 2008; Onuaha, 2010). However despite this huge endowment Nigeria is also an energy deficient country whose economy suffers tremendously from the shortage of energy supply (Iwayemi, 2008). The shortage imposes huge cost on the economy and compels widespread private provision by different classes of energy users (Lee and Anas, 1998; Adenikinju, 2005). Additionally Nigerians often spend many productive hours queuing for petroleum products in the fuelling stations to buy fuel at government regulated prices because fuel supply scarcity has been a recurrent feature of the Nigerian energy market. Fuel scarcity in the economy and failing electricity supply create dual energy crisis for Nigeria (Iwayemi, 2008).

Investment in back up generating facility is widespread and imposes significant costs on the economy. Small Scale businesses suffer the most from Nigeria’s energy poverty as they spend a large proportion of their capital (about 20- 25% of their investment) on back up generating facilities (Lee and Anas, 1991; Foster and Steinbuks, 2008). In fact Iwayemi, (2008) links most of the country’s economic woes including its inability to industrialize to the dismal performance of the energy sector.

However power supply outages are not peculiar to developing countries alone considering the recent black outs in California and other parts of north Western United States of America. Though it has been the cardinal policy of government electricity policy and consumers desire to have power supply reliability, keeping the light on is an extremely difficult challenge (DOE, 2003) especially in a developing economy. Ukpong, (1973); Iyanda, (1982); Lee and Anas, (1991, 1992); Uchendu, (1993); Ajayi (1995), Adenikinju, (2005); Oseni and Pollit, (2013) have examined the cost of power outages and unreliable supply of electricity on firms and document firms survival strategies in Nigeria and Africa.


1.2 Statement of the Problem

This study builds on the previous studies by focusing on the small scale businesses in the North West Nigeria for many reasons. First the small scale businesses have a lot of contributions to make towards the development of the Nigerian economy in terms of providing employment and income opportunities for the people. Based on experience, these types of businesses provide the surest path to industrialization. Additionally the choice of small scale business is informed by the fact they are the dominant businesses found in the North West region of Nigeria but, like other parts of Nigeria, the North West region also suffers from epileptic supply of electricity and this affects small scale industries a lot.


1.3 Objectives of the Study

  1. To determine the impact of deficient electricity supply on the operational performance of small scale businesses in north West Nigeria
  2. To evaluate the true state of power supply in the country.
  3. To ascertain the relationship between electrical power outage and operational performance of small scale industries.

1.4 Research Hypotheses

Hypothesis One
  • Ho; Deficient electricity supply does not significantly constrain the operational performance of small scale businesses in north West Nigeria.
  • Hi; Deficient electricity supply significantly constrain the operational performance of small scale businesses in north West Nigeria.
Hypothesis Two
  • H0; There is no significant relationship between electrical power outage and operational performance of small scale industries.
  • H1; There is significant relationship between electrical power outage and operational performance of small scale industries.

1.5 Significance of the Study

The study is expected to bring to the fore the challenges small scale businesses face due to unreliable supply of electricity in the region as a way of attracting the needed policy attention that could go to alleviate their plight. It is also expected to highlight on the investment potentials for electricity generation, transmission and distribution infrastructure that the private sector could take opportunity of in closing the prevailing deficit. This is especially important considering the recent introduction of electricity market reform in Nigeria.


1.6 Scope / Limitations of the Study

This study covered the impact of electrical power outage on the operational performance of small scale industries in Kano state.

Limitations of study
Financial constraint

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection through the internet, questionnaire and interview.

Time constraint

The researcher simultaneously engaged in this study with other academic work. This consequently cut down on the time devoted for the research work.


1.7 Definition of Terms

Electricity:

Is the set of physical phenomena associated with the presence and flow of electric charge.

Power Outage:

Is a short or long term loss of the electric power to an area.

Operational Performance:

Firm’s performance measured against standard or prescribed indicators of effectiveness, efficiency, and environmental responsibility such as, cycle time, productivity, waste reduction, and regulatory compliance.


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  1. 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.
  2. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  3. Chapter three deals on the research design and methodology adopted in the study.
  4. Chapter four concentrate on the data collection and analysis and presentation of finding.
  5. Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain a critical analysis of the impact of electrical power outage on the operational performance of small scale industries.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations are made, which in the opinion of the researcher will be of benefit in addressing the challenges of power outage in Nigeria


5.2 Summary

This study aimed at having a critical analysis of ascertain a critical analysis of the impact of electrical power outage on the operational performance of small scale industries. Three objectives were raised. These objectives include: To determine the impact of electricity supply on the operational performance of small scale businesses in North West Nigeria, to evaluate the state of power supply in the country, to ascertain the relationship between electrical power outage and operational performance of small scale industries.


5.3 Conclusion

Based on the above findings pertaining to the objectives of the study the following conclusions are drawn.
The impact of electricity insecurity on SMEs’ productivity is clearly variable, and depends on factors related to both the external context that a firm is operating in and to its internal capabilities. Variation in the findings between countries appears to be related to differences in geography, structure of the economy and SME sector, and the overall business environment. This is consistent with the findings of previous research (World Bank, 2010; Cissokho and Seck, 2013). The statistical analysis, however, does not explain the difference between perceptions, amounting to aconventional wisdom, that electricity insecurity is a major constraint on SMEs’ operations and growth and the empirical evidence that its impact on productivity is limited. The Enterprise Surveys themselves show that firms see the quality of electricity as a major business challenge, though between the two categories of informants in this study, SMEs and stakeholders, it was stakeholders who perceived outages as a bigger problem. Hallward-Driemeier and Aterido (2009) suggest that firm characteristics affect the importance of perceived constraints. It is also possible that perceptions are influenced by the binary nature of electricity supply, either you have it or you do not have it, and by the frustration of managing with outages which may not be reflected in measurable costs.


5.4 Recommendation

Based on the findings of the research, the following recommendations have been drawn:

  1. Government should seek ways to support SMEs and provide the needed infrastructures such as education to aid their survival and also SMEs should work on ways to attract government interest and attention. 2. SMEs should also do more to educate its employees entrepreneurially in order to enhance their performance and thereby the survival of the enterprise.
  2. Entrepreneurs should also locate their businesses where there is higher proximity to power supply as it will boost their productivity and profitability.
  3. Government should try as much as possible to provide another means of transportation apart from road as this will ultimately lead to more effective product/service delivery.
  4. SMEs should outsource for and utilize more sophisticated technology in its operations as this will increase their sales and give them an edge over their competitors.

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