Manufacturers Cut Costs with Shift to Gas as Power Woes Persist

Samuel Mobolaji

A growing number of Nigerian manufacturers are cutting operational costs by transitioning from the unreliable national grid to gas-powered energy, as power instability continues to challenge the country’s industrial growth.

Kitchen Vegetable Oil Limited, an Aba-based subsidiary of Udeagbala Holdings, is one such firm reaping the benefits of this shift. The company, which produces a wide range of FMCG and industrial goods, moved away from grid power two years ago and now runs on a 1.7-megawatt gas plant installed in partnership with Clarke Energy.

“Our decision to switch to gas was driven by the high cost and unreliability of grid electricity, which often damaged our equipment,” said Ifeyinwa C. Udeagbala, executive director at the company. “The gas plant not only provides cleaner and more stable power, but it has also significantly lowered our production costs compared to diesel.”

The plant sources pipeline gas from a leading international oil company’s downstream unit and compressed natural gas (CNG) via virtual pipeline suppliers. Clarke Energy handled the engineering, supplied the Jenbacher gensets, commissioned the system, and continues to provide maintenance support.

Yiannis Tsantilas, managing director of Clarke Energy for sub-Saharan Africa, said energy accounts for up to 40 per cent of manufacturing costs in Nigeria, citing data from the Manufacturers Association of Nigeria. “In an environment where reliable power is scarce and energy costs are rising, forward-looking companies like Kitchen Vegetable Oil are turning to gas to gain cost and efficiency advantages,” he said.

Despite the progress, Udeagbala noted that the broader manufacturing environment remains tough. Businesses still face high inflation, raw material price volatility, poor consumer purchasing power, and prohibitive lending rates. “The cost of borrowing continues to erode our margins. There is a pressing need for more affordable financing options to support expansion,” she said.

Other challenges include the prevalence of counterfeit industrial parts, sourcing delays for imported spares, and a burdensome tax regime marked by multiple levies and inconsistent enforcement across states.

Still, Kitchen Vegetable Oil remains committed to its over 200 employees and is exploring expansion into West African markets. “We see potential in the region, but we’re also reviewing trade barriers, cross-border logistics, and the risks of moving goods across unstable checkpoints,” Udeagbala said.

For Nigerian manufacturers, the shift to gas may offer some relief, but structural reforms remain crucial for long-term competitiveness.