IMPACT OF POWER SUPPLY ON THE PERFORMANCE OF SMES IN NIGERIA A CASE STUDY OF SELECTED FIRMS IN ASABA

CHAPTER ONE

1.0  INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Power supply whether to large corporations or SMEs is a very critical factor for ensuring performance. Access to a reliable power supply is widely considered as vital to the operations of most small and medium-scale businesses. Surveys suggest that, in most developing countries, firms themselves consider access to electricity to be one of the biggest constraints to their business. Inadequate electricity services can constrain business operations because a supply of electricity may simply be unavailable and, if it is available, securing a connection may be difficult and the supply unreliable, even before its cost is considered. High quality and accessible infrastructure encourages productivity, business growth and investment, but when it is poor and unreliable, businesses’ productivity and growth suffer. An unreliable electricity supply – electricity insecurity – can affect several aspects of business operations. The most significant impacts to productivity can be due to forced and unexpected halts in manufacturing processes, including running assembly lines, using machine tools, or producing textiles. Communications, delivery times, lighting and refrigeration are also affected by electricity insecurity, with consequences for the routine operation of businesses and their ability to ensure delivery times.

Research on SME problems in Nigeria have so far concentrated on variables such as product and service development challenges, difficulties in accessing finance, competitiveness of SMEs and government policy and intervention in the area of SME development (Abdullah, 2013; Olumuyiwa and Mnse (2008). Whiles these variables were studied independently, there is a relationship between other variables like the price of energy (electric power) and an SME’s capacity toproduce optimally, its sales volume and labour cost. For SMEs in particular and for national economic development in general, the activities of electric power providers are vital and they need to be monitored because “in the utilities industry, where fully/sufficiently competitive environments are not achieved, the general public’s interests are at risk, either through development in general, the activities of electricity power providers are vital price exploitation, or through the degradation of quality of supply and customer services” (Chau, 2009).

Nigeria has an abundant supply of energy sources. It is endowed with thermal, hydro, solar, and oil resources, and yet it is described as an energy-poor country because the sector is relatively under-developed. The statistics available show that only about one third of Nigeria or approximately 40 per cent of the population has access to electricity. The distribution of electricity shows great disparities between rural and urban, and between residential and industrial areas in the urban centers (Ali-Akpajia and Pyke, 2003). The very poor quality of power supply in recent years has been a major constraint on the performance of most industries in the economy.