Spike in energy costs mounts fresh pressure on businesses

About a week after the fresh spike in the price of petrol, businesses have complained about the inability to cope with the rising energy costs.

They lamented that they are still dealing with the high cost of electricity and are still looking for solutions to it, only to be slammed with not just another fuel scarcity but an almost 40 per cent increase in the price of petrol.

Co-founder, Kazih Kits Limited, Dr Chinedu Azih, rued the current situation, adding that the situation needs urgent attention.

She pointed out that despite increasing the electricity tariff, “we are on an unknown band to say the truth.”

“The light situation is very poor, yet at the end of the month, we are presented a hefty bill. We have been augmenting the poor power supply with diesel and petrol generators just to produce but with this hike in the cost of fuel, we are now between a rock and a hard place. We still have to pay the light bill at the end of the month for power that was never available. We queue for hours for expensive fuel and still try to remain profitable. How is this possible?” she queried.

Adding that raising prices of goods is often a last resort as end users’ frown at it, she said it has become necessary as energy costs are squeezing life out of businesses.

“We can no longer cope with these costs. They are affecting businesses badly. If anyone had told me last month that we would be looking for and queuing to buy fuel at N1,100 per litre, I would never have believed it; yet here we are today. I am begging the government to prioritise the survival of the manufacturing sector. We cannot afford to lose more businesses,” she said.

The Executive Secretary, Nigerian Association of Small and Medium Enterprises (NASME), Eke Ubiji, noted that production costs for many businesses had gone up by as much as 100 per cent.

“We should be worried because with the increase in prices, how many businesses would be able to sell? All other inputs they use have also gone up and the average manufacturer is trying to stay in business. At the end of the day, what they will produce may not be affordable for many, so who will lose? When businesses are not making sales and shut down production temporarily or permanently, we will all suffer. The energy situation has gotten out of hand and calls for urgent attention. Businesses can no longer afford either the national grid or alternative energy, and that is a problem,” he said.

He went on to express shock that manufacturers were not granted electricity tariff subsidy as some other sectors were granted. “If government can give universities subsidy, the real sector, which is the lifeblood of the economy, should also be given subsidy. The real sector is often overlooked and neglected. It is a shame.”

Expressing worry over the survival of businesses going forward, he said that if nothing is done to address their energy concerns, many more businesses would go under.

On his part, the Chief Executive Officer (CEO), Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the rising energy costs would have adverse effects on businesses.

He, however, said for a developing economy like Nigeria, alternative sources of energy are very limited and often expensive.

“Businesses are going through a lot. We must be careful not to overburden them. In other climes, there is often one form of subsidy or another, even on energy, to support businesses. This increase of roughly over 40 per cent is on the high side. Even if we must transit to a deregulated economy, it must be gradual so that the shock won’t be too much, especially since businesses are yet to recover from earlier shocks.

“One must be worried about the future of businesses as all the key economic fundamentals are not looking good. FX is still a problem; insecurity is still raging and energy costs keep soaring daily. Looking at all these, the outlook for Q4 is not looking very bright and this is why some of these reforms must be reviewed immediately,” he stated.

Yusuf said the review should address the challenges the ongoing reforms have created and accelerate the implementation of the intervention programmes promised by the Federal Government to manufacturers.

“The executive order to give import duty waivers to pharmaceutical companies has not been implemented three months later. It was supposed to be implemented since July but we have heard nothing till date. The government should address these bottlenecks impeding the implementations of some of these intervention measures to save the real sector,” he said.

President of the Association of Small Business Owners in Nigeria (ASBON), Femi Egbesola, expressed concern that the cost of doing business has already skyrocketed, describing the energy crisis as another big blow for small businesses in addition to the other major blows they have been dealt with.

“When we have higher costs of doing business, the implication is that prices of goods and commodities will go up. I foresee inflation rising sharply again in the next few weeks as there will be a sharp increase in the cost of goods and services across board. As it is, landlords will want to increase rent, farmers will increase the cost of produce and so on because everything is tied to fuel. For an average business owner, our chances of survival are again reduced even more so we will begin to see more businesses cutting back, sacking some of their staff thereby increasing unemployment. Our products will also be less competitive internationally because they will only become more expensive,” he added.

He said the business environment can no longer absorb these shocks. “In some other places, where you see an increase in basic needs provided by the government, you see the government also providing interventions and support for businesses and average citizens. Here, the reverse is the case, it is one shock after another. Even the proposed N70, 000 minimum wage cannot solve the basic needs of an average worker now. I foresee a serious crisis in the economy and business sector. More people might even die because of lack of ability to provide for basic needs, purchasing power has been greatly eroded,” he said.

Adding that their immediate projections see another two per cent of businesses packing up in Q4 due to the energy crisis, he said they are trying to save what is left of local businesses.

“We’re looking at how to diversify, especially our members in the food value chain, so we remain competitive. We are also looking at how to adopt technology to reduce costs, particularly in the area of transportation, we’re also looking at alternative energy and exploring increased exportation of our products to other countries with stronger currencies. We are also trying to get funding from outside Nigeria, which comes at cheaper interest rates and longer tenors. We are also building the capacities of business owners to adapt to these changes to help them survive these uncertain times,” he said.