KEY POINTS
- CPPE warns that rising energy costs could threaten the survival of many SMEs in Nigeria as operating expenses continue to increase.
- Businesses are already facing economic pressures such as inflation, high interest rates, and weak consumer purchasing power.
- CPPE advises firms to adopt gradual price adjustments, strengthen financial management, and improve efficiency to survive rising energy costs.
The Centre for the Promotion of Private Enterprise, CPPE, has raised concerns that the recent surge in energy prices could endanger the survival of small and medium-scale enterprises (SMEs) across Nigeria if urgent policy interventions are not implemented.
The organisation disclosed this in a policy brief shared with Nairametrics on Sunday, warning that the sharp rise in energy costs is significantly increasing operational expenses for businesses and could undermine the sustainability of many enterprises, particularly SMEs that operate with limited financial buffers.
According to the Chief Executive Officer of CPPE, Dr. Muda Yusuf, many businesses in Nigeria are already grappling with severe macroeconomic pressures, making the latest increase in energy prices especially troubling.
Energy price surge deepens business challenges
CPPE noted that the spike in energy costs is intensifying the already harsh business environment confronting companies nationwide.
The organisation explained that businesses are currently facing multiple economic headwinds, including rising inflation, high interest rates, and weakened consumer purchasing power. These factors, it said, have already placed considerable strain on business operations and profitability.
“Businesses are already contending with multiple macroeconomic pressures including high inflation, elevated interest rates and weak consumer purchasing power,” the policy brief stated.
“The latest escalation in energy costs therefore compounds an already challenging operating environment.”
The group warned that the surge in operating expenses could erode profit margins, reduce productivity, and threaten the long-term sustainability of many businesses, particularly smaller enterprises that lack the financial capacity to absorb sudden cost increases.
CPPE also cautioned that the situation could have wider economic consequences if not addressed promptly, noting that SMEs play a crucial role in employment creation and economic growth across the country.
To mitigate the impact of rising energy costs, CPPE advised businesses to adopt strategic adjustments in their pricing models while remaining sensitive to fragile consumer demand.
The organisation recommended that firms consider gradual price adjustments that reflect the increasing costs of production and operations. It also urged businesses to strengthen their product value propositions to remain competitive in the market despite rising prices.
