High energy costs threaten business survival - CPPE warns
The Centre for the Promotion of Private Enterprise (CPPE) has warned that the relentless surge in global energy prices, exacerbated by intensifying geopolitical tensions in the Middle East, is pushing Nigerian businesses particularly Small and Medium Enterprises (SMEs) to a breaking point.
In a statement released on Sunday, the think tank underscored that the combination of high inflation, elevated interest rates, and weak consumer purchasing power has created a perfect storm that threatens the very sustainability of the private sector.
Dr. Muda Yusuf, Chief Executive Officer of the CPPE, observed that the Nigerian context is uniquely challenging because the domestic economy remains heavily tethered to petrol and diesel for day-to-day operations.
This dependency, rooted in the long-standing frailty of the national electricity grid, means that every fluctuation in global crude oil markets translates directly into a spike in local production and distribution costs.
To prevent a widespread collapse of margins and a subsequent dampening of national economic growth, the CPPE is advocating for a dual-track approach involving radical internal adjustments by business owners and aggressive policy interventions from the federal government.
For the private sector, the CPPE suggests that the era of cheap, fossil-fuel-reliant energy is over, necessitating an immediate shift toward energy efficiency and source diversification.
Dr. Yusuf noted that firms must now treat energy management as a core competitive strategy by optimizing generator run-times and investing in energy-efficient machinery.
While the initial capital outlay for solar and hybrid energy systems may appear daunting, the long-term savings are becoming an economic necessity as diesel prices remain volatile.
Beyond power generation, the advisory encourages businesses to rethink their logistics by consolidating deliveries and leveraging digital platforms to reduce physical transit, thereby insulating their supply chains from fuel price shocks.
The CPPE further highlighted that financial resilience will depend on how creatively businesses manage their costs and pricing.
Rather than passing the full weight of energy hikes onto an already burdened consumer through aggressive price increases, the report suggests that firms adopt innovative packaging and gradual price adjustments to maintain market share.
Collaborative efforts, such as shared power and warehousing within industrial clusters, are also recommended as a way for smaller players to tap into economies of scale that would otherwise be out of reach.
On the policy front, the CPPE is calling on the government to treat the energy crisis as a structural emergency.
The advisory emphasizes that the state must expand fiscal incentives, including import duty waivers and tax credits, to make renewable energy equipment more affordable for the masses.
Access to finance remains a significant hurdle therefore, the creation of dedicated funding windows by development finance institutions is seen as a critical step in accelerating the nation's energy transition.
The statement concluded by reinforcing the strategic importance of domestic refining capacity and grid reliability.
By ensuring a steady supply of crude oil to local refineries, the government can shield the domestic market from international supply disruptions and reduce the heavy demand for foreign exchange.
The CPPE added that while businesses must adapt to survive, the most sustainable path to national competitiveness lies in the government's ability to fix the electricity value chain and provide a stable, cost-effective power supply that moves the economy away from its expensive reliance on private generators.