The Centre for the Promotion of Private Enterprise (CPPE) has warned that the recent surge in global energy prices is intensifying cost pressures on Nigerian businesses and threatening the sustainability of many small and medium enterprises (SMEs).
In an advisory note issued on March 15, the Chief Executive Officer of the organisation, Dr. Muda Yusuf, said escalating geopolitical tensions in the Middle East have driven global energy prices higher, compounding the already difficult operating environment for businesses.
According to the CPPE, Nigerian enterprises are particularly vulnerable because many rely heavily on petrol and diesel generators for power due to persistent electricity supply challenges.
Rising fuel costs have also pushed up transportation and distribution expenses, significantly increasing operating costs and squeezing profit margins.
The organisation noted that businesses are already grappling with high inflation, elevated interest rates and weak consumer purchasing power, warning that the additional burden of energy costs could undermine business sustainability and slow economic growth if urgent measures are not taken.
Strategies for Businesses
To cushion the impact, the CPPE advised businesses to adopt several operational strategies, beginning with improving energy efficiency.
It said firms should review their energy consumption patterns, optimise generator usage, deploy energy-efficient equipment and encourage energy conservation practices among employees to reduce fuel consumption.
The organisation also stressed the importance of diversifying energy sources. It urged businesses to gradually adopt alternatives such as solar power systems, hybrid energy solutions combining solar with generators, and gas-powered generators where gas infrastructure is available.
While the initial investment may be high, the CPPE noted that the long-term cost savings are becoming increasingly attractive amid persistently high fuel prices.
In addition, businesses were encouraged to improve logistics and supply chain management to reduce fuel usage. Measures such as consolidating deliveries, optimising transport routes, strengthening fleet management systems and leveraging shared logistics platforms could help cut transportation costs.
The CPPE further advised companies to adopt flexible pricing and cost management strategies, including gradual price adjustments, improved product value propositions and innovative packaging formats that allow firms to remain competitive in a fragile consumer market.
Strengthening financial management was also highlighted as critical. The organisation recommended that businesses reduce non-essential spending, improve inventory management and renegotiate supplier payment terms where possible in order to maintain adequate liquidity during periods of energy price volatility.
Another strategy proposed by the CPPE is the use of cluster-based solutions, where businesses within industrial clusters share infrastructure such as power generation, logistics services and warehousing facilities to reduce operating costs through economies of scale.
Policy Priorities for Government
Beyond business-level adjustments, the CPPE called on government to introduce supportive policies aimed at easing the structural energy cost burden on enterprises.
Among the key recommendations is the expansion of fiscal and regulatory incentives for renewable energy adoption. These include tax incentives for solar installations, import duty waivers for renewable energy equipment and fiscal support for investments in energy-efficient technologies.
The organisation also urged government, development finance institutions and commercial banks to create affordable financing windows that would enable SMEs to invest in renewable energy systems and energy-efficient equipment.
In addition, the CPPE emphasised the importance of strengthening Nigeria’s domestic refining capacity to reduce reliance on imported petroleum products.
It noted that expanding local refining and ensuring stable crude supply to domestic refineries would help moderate the impact of global energy price volatility on the local economy while easing pressure on foreign exchange demand.
The organisation further stressed the need to improve electricity supply reliability across the country. It called for increased investment in electricity generation, transmission infrastructure and distribution networks to ensure a more stable power supply for businesses.
According to the CPPE, a reliable national grid would significantly reduce businesses’ dependence on petrol and diesel generators, which currently account for a substantial share of operating costs.
Building Economic Resilience
The advisory concluded that the current surge in global energy prices underscores the vulnerability of economies to external shocks.
However, the CPPE said Nigeria can mitigate the impact by combining proactive business adaptation with supportive public policy reforms, particularly in renewable energy adoption, electricity sector reforms and domestic refining capacity.
“With the right policy actions and strategic responses from businesses, Nigeria can strengthen the resilience and competitiveness of its business environment despite global energy market disruptions,” Yusuf said.
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