As the current surge in global energy prices, driven by escalating geopolitical tensions in the Middle East continues unabated, the Centre for the Promotion of Private Enterprise (CPPE) has outlined key strategic measures that both businesses, particularly small and medium enterprises (SMEs), and government should adopt to mitigate the impact of the current energy crisis.
The frontline organized private sector (OPS) advocacy group in its Advisory Note titled ‘Mitigating the Impact of Energy Cost Escalation: What Businesses and Government Should Do’ issued on Sunday and signed by the Director/Chief Executive Officer, Dr. Muda Yusuf, noted that the Middle East conflict had intensified cost pressures for businesses across many economies globally.
Specifically, it noted that in Nigeria, the impact had been especially severe because enterprises depend heavily on petrol and diesel to power their operations amid persistent electricity supply challenges, while also facing rising transport and distribution costs due to higher energy prices.
The CPPE stated that the combined effect was a significant escalation in operating expenses, mounting pressure on profit margins, and heightened risks to business sustainability, particularly for small and medium enterprises.
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According to the OPS-oriented advocacy group, as a result of the worrisome development businesses are already contending with multiple macroeconomic pressures including high inflation, elevated interest rates and weak consumer purchasing power and that the latest escalation in energy costs therefore compounds an already challenging operating environment.
It maintained that without deliberate adjustments by businesses and supportive policy interventions from government, rising energy costs could significantly erode profit margins, weaken business sustainability and dampen economic growth.
Against this backdrop, the Centre outlines key strategic measures that both businesses and the Nigerian government should adopt to mitigate the impact of the current energy crisis as including Improving energy efficiency; Energy sources diversification; Improving logistics and supply chain efficiency of energy costs; Adopting flexible pricing and cost management strategies: Strengthening cash flow and financial management; and Leveraging cluster-based solutions.
For instance, on energy sources diversification the CPPE advocated: “The current crisis highlights the strategic importance of energy diversification. Nigerian businesses remain excessively dependent on diesel and petrol generators for electricity generation. This exposes firms to significant fuel price volatility.
“Businesses should therefore gradually explore alternative energy solutions such as solar power systems, hybrid energy systems combining solar with generators, and gas-powered generators in locations where gas infrastructure is available. While the upfront investment cost may appear significant, the long-term savings from renewable and hybrid energy solutions are becoming increasingly compelling in the face of persistently high fuel prices”, it added.
For the government, the group canvassed the need for Policy priorities such as Expanding incentives for renewable energy, Providing affordable financing for energy transition, Strengthening domestic refining capacity, and Improving electricity supply reliability
On the need for government to prioritize policies that would strengthen the domestic crude oil refining capacity, the CPPE clarified: “Domestic refining is a critical pillar of Nigeria’s energy security and an important buffer against volatility in the global energy market. Expanding local refining capacity and ensuring a stable and predictable supply of crude oil to domestic refineries are essential for strengthening the resilience of the country’s petroleum products market. A well-functioning domestic refining ecosystem can help moderate the transmission of global supply disruptions into the domestic economy.
“Beyond supply security, domestic refining also has significant macroeconomic benefits. By reducing the country’s dependence on imported petroleum products, local refining lowers the demand for foreign exchange used for fuel imports, thereby easing pressure on the exchange rate and improving Nigeria’s balance of trade. Over time, a strong domestic refining base can also support export opportunities for refined products within the African region, further strengthening external reserves and Nigeria’s position in regional energy markets”, the group stressed.
It its concluding remarks, the Centre pointed out that the current surge in global energy prices, which was primarily triggered by geopolitical tensions in the Middle East, once again highlighted the vulnerability of businesses and economies to external shocks in global energy markets.
It argued that for Nigerian businesses, resilience would depend on improving energy efficiency, diversifying energy sources, strengthening financial management and improving logistics efficiency, adding that for government, the crisis underscores the urgency of accelerating reforms in electricity supply, renewable energy adoption and domestic refining capacity.
The CPPE expressed optimism that with the right combination of proactive business adaptation and supportive public policy, Nigeria can significantly mitigate the impact of the current energy price shock and strengthen the resilience and competitiveness of its business environment in the global economic landscape.
