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.

 TABLE OF CONTENTS

1.0   INTRODUCTION 

1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study

CHAPETR TWO

2.0   LITERATURE REVIEW

CHAPETR THREE

3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

CHAPTER ONE

INTRODUCTION

• 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.

The survey by Manufacturing Association of Nigerian the first quarter of 2006 paint a gloomy picture of the Nigerian crisis industrial sector. For instance, the survey showed that only 10 per cent of manufacturing concerns in Nigeria operate at 48.8 per cent of installed capacity. The survey also notes that about 60 per cent of the companies operating were barely able to cover their average variable costs, while 30 per cent had completely closed down. According to that report, most of the industrial areas around the country suffered an average of 14.5 hours of power outage per day as against 9.5 hours of supply, and the cost generating power supply by firms for production constitute about 36 per cent of total cost of production (Okafor, 2008; Adegbamigbe, 2007 and Udaejah, 2006). Indeed, Nigeria’s electricity sector is in crisis. The supply of e1ecricity supply of in Nigeria is bedeviled with consistent crisis as exemplified by such indicators as electricity blackouts and persistent on self-generating electricity. Indeed as noted by Ekpo (2009), Nigeria is running a generator economy with its adverse effect on cost of production. The country’s electricity market is dominated on supply side by a state owned monopoly. Nigeria Electricity Distribution Company (NEDC), the private and current owner of the former Power Holding Company of Nigeria (PHCN) and the National Electrical Power Authority (NEPA) has been incapable of providing minimum acceptable international standards of electricity service that is reliable, accessible and available for the past decades.

• STATEMENT OF THE PROBLEM

In the business world of today, Power/Electricity is very important to the effective performance and continued operation of SMEs. Many businesses have moved from Nigeria to other countries due to the continued drop in electricity supply. Lack of power/electricity infrastructures negatively affects the productivity and profitability of manufacturing SMEs (Adelakan, 2005; Akinwale, 2010; Doe & Asamoah, 2014). The poor quality of electricity supplies in the country is perceived by SMEs to impact their operations negatively. Voltage fluctuations and power outages can halt production, damage equipment and affect product quality. Therefore, it is generally believed that poor power/electricity infrastructure is a serious constraint on SME performance. 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.

• OBJECTIVE OF THE STUDY

The objectives of this study are;

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

• RESEARCH HYPOTHESES

HYPOTHESES ONE

Ho: Poor electricity supply does not significantly constrains the operational performance of small scale businesses

Hi:   Poor electricity supply significantly constrains the operational performance of small scale businesses

HYPOTHESIS TWO

Ho: 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 AND LIMITATION OF THE STUDY

This study is primary concerned with the impact of electrical power outage on the operational performance of small scale industries. This study/project work covers Kano State Nigeria. The researcher encountered some constraints, which limited the scope of the study. These constraints include but are not limited to the following

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

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

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

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