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THE IMPACT OF ELECTRICAL POWER OUTAGE ON THE OPERATIONAL PERFORMANCE OF SMALL SCALE INDUSTRIES

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 questions  

1. Does electrical power outage affect the operational performance of small scale industries?

2. What is the relationship between electrical power outage and operational performance of small scale industries.  

3. How can electricity supply be made available to small scale industries in Kano state?  

1.5 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.      

1.6 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.  

1.7 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  

1. 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.

2. 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.  

1.8 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.