By Seun Ibiyemi
The Centre for the Promotion of Private Enterprise (CPPE) has called on businesses and government to adopt urgent measures to mitigate the impact of escalating energy costs on Nigeria’s economy, warning that the trend could threaten the sustainability of many small and medium enterprises.
In an advisory note titled “Mitigating the Impact of Energy Cost Escalation: What Businesses and Government Should Do,” the organisation said the surge in global energy prices—driven largely by geopolitical tensions in the Middle East—has intensified cost pressures for businesses across many economies, with Nigerian firms particularly vulnerable.
The advisory, signed by the Chief Executive Officer of CPPE, Muda Yusuf, noted that Nigerian businesses depend heavily on petrol and diesel generators due to persistent electricity supply challenges, making them more exposed to rising fuel prices and higher transport costs.
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According to CPPE, the combined effect of these factors has significantly increased operating expenses, squeezed profit margins and heightened risks to business sustainability, especially for SMEs already grappling with high inflation, elevated interest rates and weak consumer purchasing power.
The organisation advised businesses to adopt strategic measures such as improving energy efficiency, diversifying energy sources, strengthening logistics and supply chain efficiency, and adopting flexible pricing strategies to manage rising operational costs.
It also urged firms to strengthen financial management practices, including improving inventory management, reducing non-essential expenditures and maintaining adequate liquidity buffers to withstand cost shocks.
CPPE further encouraged businesses operating within industrial clusters to consider shared infrastructure arrangements such as joint power generation, logistics services and warehousing facilities to reduce energy and transportation costs through economies of scale.
On the policy side, the organisation called on government to expand incentives that encourage the adoption of renewable energy solutions, including tax incentives for solar installations and import duty waivers for renewable energy equipment.
It also stressed the need for affordable financing for businesses seeking to invest in alternative energy systems, urging development finance institutions and commercial banks to create dedicated funding windows to support energy transition for SMEs.
The advisory further highlighted the importance of strengthening domestic refining capacity to reduce Nigeria’s dependence on imported petroleum products and ease pressure on foreign exchange demand.
CPPE said improving the reliability of electricity supply remains the most sustainable solution to Nigeria’s high energy cost environment, noting that a more efficient power sector would significantly reduce the heavy reliance of businesses on petrol and diesel generators.
The organisation concluded that a combination of proactive business adaptation and supportive government policies would be critical in mitigating the impact of global energy price shocks and strengthening the resilience of Nigeria’s business environment.
