The Director of Programmes of the Institute of Entrepreneurs (IOE), Nigeria, Dr Mike Omonbude, has called on the Federal Government to introduce supportive policies and infrastructure to cushion the impact of fluctuating petroleum prices on Small and Medium-sized Enterprises (SMEs).

Omonbude emphasised the need for urgent intervention to ensure the survival and growth of businesses amidst volatile market conditions. In a paper titled ‘Conceptual Market Price in Nigeria’s Petroleum Industry: Gaining Understanding of the Complex Nature of the Petroleum Market’, Omonbude underscored the critical role of petroleum products, such as Premium Motor Spirit (PMS), diesel, and kerosene, in powering Nigerian businesses and transportation systems.
He noted that fluctuations in the prices of these products have a direct and significant impact on the operational costs and profitability of SMEs.

“Petroleum price fluctuations are contributing to widespread inflation, driving up the cost of goods and services across various sectors, including manufacturing, food, transport, and raw materials,” Omonbude explained.

He highlighted that rising input costs are straining SMEs, which are also grappling with reduced consumer purchasing power and lower demand for their products and services.

Omonbude called on the government to introduce strategic support, including improved infrastructure, reliable electricity supply, tax incentives, and investments in alternative energy.

He stressed that such measures would help mitigate the financial burden on SMEs, allowing them to navigate the rapidly changing market while maintaining operations and planning for growth.

Omonbude further stated that the removal of fuel subsidies has compounded the problem, noting that many businesses, especially those reliant on generators due to Nigeria’s inconsistent power supply, are now facing sharply higher energy costs.

He also noted that SMEs in logistics, retail and manufacturing have been particularly hard-hit, with rising fuel prices leading to increased expenses for transportation and production.

“Many SMEs are now scaling back their expansion plans, delaying investments in new equipment, additional locations, and staff hires due to the uncertainty around energy costs and transportation,” Omonbude stated.

Further, he noted that smaller businesses are at a disadvantage compared to larger firms, which can absorb rising costs through greater financial resources or advanced technology.

He said the situation is exacerbated by imported goods, which often come with more stable energy costs, making it harder for Nigerian SMEs to compete with foreign products.

Despite these challenges, Omonbude highlighted that there are opportunities for SMEs to innovate and adapt. He encouraged businesses to explore digital platforms to reduce physical overhead costs and consider investments in energy-efficient technologies or renewable energy sources like solar power to lessen their dependence on petroleum products.

Omonbude warned that without interventions to cushion the rising operational costs and shrinking profit margins, the competitiveness and sustainability of these businesses could be at risk.