The recent removal of petrol subsidy and subsequent surge in petrol prices have dealt another blow to Nigeria’s already beleaguered small business sector, exacerbating the challenges faced by millions of enterprises. This comes as the country continues to grapple with the fallout from the COVID-19 pandemic and the Russia-Ukraine war, both of which have severely impacted economic activity.
Small businesses, including nano, micro, and small-scale enterprises, have been grappling with a multitude of issues, including poor power supply, rising borrowing costs, soaring inflation, restrictive economic policies, foreign exchange volatility, and tax multiplicity. The sharp increase in petrol prices is now adding to their burdens and pushing many on the verge of closure.
For business owners heavily reliant on petrol to power generators, the price hike has had a significant impact on their production costs. Toyin Oladimeji, CEO of Ola Foods, highlighted how her production costs have doubled due to the surge in petrol prices, leading to declining sales and threatening the survival of her business. Similar sentiments were expressed by other small business operators who rely on petrol for their operations.
President Bola Tinubu’s recent announcement of the removal of petrol subsidy sparked petrol queues across the country, as fuel stations suspended product dispensation. The average price of petrol in Nigeria skyrocketed from N191.8 per litre to N526.7 per litre within a month, further straining small businesses.
The repercussions of this price hike are felt beyond the small business sector. Adenike Fagbemi, founder of BrandTell Nigeria Limited, a digital marketing company, lamented the impact on the work environment. With poor power supply, businesses heavily rely on alternative energy sources, such as generators, resulting in increased energy costs.
The Association of Small Business Owners of Nigeria and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) expressed concerns over the dire situation. Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, warned that small businesses, already struggling to survive, would face double production costs due to the petrol price hike. He predicted more business closures and a worsening cost-of-doing-business crisis.
NACCIMA also emphasized the need for measures to cushion the impact of subsidy removal, such as fixing the country’s comatose refineries to end petroleum products importation. The organization called on the government to provide power infrastructure and consider tax holidays to alleviate the burden on small businesses.
Experts have warned of the consequences for Nigerian consumers, as small business owners are likely to transfer the increased production costs to the prices of goods and services. The country has been grappling with high inflation rates, and the recent surge in petrol prices will further exacerbate the cost of living crisis, particularly affecting fixed-income earners.
Ayodeji Ebo, managing director and chief business officer at Optimus by Afrinvest Limited, highlighted the need for long-term solutions, including investment in power infrastructure to reduce production costs, and proposed tax incentives to mitigate the impact on businesses.
The challenges faced by small businesses in Nigeria are mounting, and urgent action is needed to support their survival. As the country confronts the removal of petrol subsidy and soaring petrol prices, finding solutions to stabilize the business environment and alleviate the burden on small enterprises becomes crucial. Failure to address these issues could result in more closures and a deepening economic crisis.
The Nigerian government, business associations, and relevant stakeholders must collaborate to implement measures that foster an enabling environment for small businesses, allowing them to overcome their current challenges and contribute to the nation’s economic recovery.
