The Centre for the Promotion of Private Enterprise (CPPE) has warned that the recent surge in energy prices could threaten the survival of small and medium-scale enterprises (SMEs) in Nigeria if urgent measures are not taken.
The organisation disclosed this in a policy brief shared with Nairametrics on Sunday, noting that rising energy costs are increasing operating expenses for businesses and could weaken sustainability across the SME sector.
According to the Chief Executive Officer of CPPE, Dr. Muda Yusuf, many Nigerian businesses are already struggling with difficult macroeconomic conditions, making the latest increase in energy costs particularly concerning.
What CPPE is saying
CPPE said the escalation in energy prices is worsening an already challenging business environment for companies across the country.
- “Businesses are already contending with multiple macroeconomic pressures including high inflation, elevated interest rates and weak consumer purchasing power.”
- “The latest escalation in energy costs therefore compounds an already challenging operating environment.”
The organisation warned that higher operating costs could erode profit margins and weaken the sustainability of many SMEs.
It also noted that the rising cost burden could slow broader economic growth if left unaddressed.
The group stressed that SMEs are particularly vulnerable because many lack the financial buffers needed to absorb sudden increases in operating costs.
More insights
To cope with rising energy costs, the CPPE advised businesses to review their pricing strategies while remaining sensitive to fragile consumer demand.
- Businesses may consider gradual price adjustments to reflect rising production and operating costs.
- Companies can strengthen product value propositions to maintain competitiveness in the market.
- Introducing smaller product sizes or alternative packaging formats could help manage price increases without losing customers.
- Product redesign and improved value offerings may also help sustain demand despite higher costs.
The organisation noted that these measures could help businesses balance rising costs while protecting their customer base.
Beyond pricing strategies, the CPPE highlighted the need for stronger financial management practices as businesses face higher operating expenses.
- Firms were advised to reduce non-essential expenditures in order to preserve cash flow.
- Improved inventory management can help reduce unnecessary costs.
- Businesses may also renegotiate supplier payment terms to ease short-term liquidity pressures.
- Maintaining adequate liquidity buffers is critical for surviving temporary cost shocks.
The group warned that liquidity pressures typically intensify during periods of energy price volatility, particularly for SMEs with limited access to financing.
What you should know
Earlier, the Nigeria Labour Congress (NLC) called on the Federal Government to urgently intervene following the surge in petrol prices to between N1,230 and N1,300 per litre across the country.
Nairametrics earlier reported that the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has urged the Federal Government to channel gains from the current surge in global oil prices into investments in Nigeria’s gas infrastructure.
The remarks come amid renewed tensions in the Middle East, where the ongoing war involving Iran and the combined forces of Israel and the United States has disrupted global energy supply and pushed crude oil prices higher in the international market.
