How One Nigerian Manufacturer Reduced its Diesel Usage to Save N4M a Month

June 22, 2022
Daystar

With a nearly 200% increase in diesel prices, Nigerian manufacturers and corporations are integrating solar into their energy mix to save millions of naira per month.

Diesel prices have reached an all-time high. Since December, diesel prices have surged 188% from N250 to N720 per liter. The crucial fuel that powers the Nigerian economy has reached up to N810 per liter outside major cities like Lagos and Abuja.

With global diesel markets in turmoil, diesel prices are unlikely to go down anytime soon.

This is a blow to Nigerian businesses which depend on running diesel generators to provide a steady and reliable supply of power. Even before the unprecedented price spike, Nigerian businesses regularly cited diesel as their second or third largest expense. Manufacturers point to diesel as representing 40% of operating costs.

But there’s one way Nigerian businesses are weathering the storm: solar energy.

By installing solar power plants, Nigerian companies are dramatically cutting their diesel consumption and saving millions of naira each month.

Global diesel supply shocks

Let’s back up a bit: how did we arrive at such a volatile diesel market?

After years of relative price stability, global diesel markets have been thrown into a tailspin.

The severe diesel shortage was in the making before the Russia-Ukraine crisis.

As the global economy started to recover from Covid, the transportation sector - a major diesel consumer - started to revive and led to a surge in diesel prices.

But refineries have struggled to meet surging demand as they cut back supply due to high natural gas prices.

It didn’t help that diesel inventories in Europe and the US have reached historical lows. US stocks plummeted to a 16-year low.

The Russia-Ukraine crisis has only exacerbated the situation.

With limited refining capacity and tightening available supply, the diesel price outlook doesn’t look to improve in the near future.

Hybridized solar energy

Nigerian factories and corporations need to reduce diesel consumption – and fast. All businesses want to keep production lines running so they can make their sales targets. But, some Nigerian companies said they’ll be forced to shut down if they can’t source cheaper power.

But, Nigerian businesses have another option: they can incorporate solar into their energy mix.

In Nigeria, solar energy is most viable as a hybridized power source – it is integrated with other power sources instead of acting as a standalone. Factories run on solar for 10 hours and unless they have installed a lithium battery storage, they switch to a diesel generator or the grid at night.

Contrary to belief, Nigerian businesses don’t pay for solar equipment. There are no upfront costs. They only pay a tariff per kilowatt hour for electricity consumed while the independent solar energy provider owns, operates, and services the solar installation.

Solar is driving significant cost savings

Solar power has never made more commercial sense given the diesel price spike. Nigerian businesses which installed solar plants at their factories and offices are reaping the benefits by slashing their diesel costs.

This year, Primlaks, a diversified company in frozen goods and aquaculture, installed two solar plants for its Lagos operations. The plants include a 600kWp plant for its frozen foods business, and a 500kWp plant at another site. For the frozen foods unit, solar now provides 40% of its daytime power. The company is saving the equivalent of 74,849 liters of diesel – the equivalent  of four 6-wheel tanker trucks - and nearly 48M naira per year.

By reducing its diesel consumption, Primlaks is saving 4M naira per month, a not insignificant contribution to the bottom line.

It’s not just large factories that are benefiting from powering their operations with solar. Banks and other commercial institutions are also hedging against price hikes with solar installations.

Our inbound has surged 300%

Diesel prices are unlikely to come down anytime soon.

With solar energy, Nigerian businesses can save millions of naira in diesel bills and avoid disruptions to their production and sales.

Since March, we’ve had a 300% increase in our inbound sales requests. More Nigerian businesses are realizing the benefits of solar, starting with massive cost savings.

Are you interested in saving millions of naira to power your business? Get in touch for a free consultation.