By David Akinmola
Small and Medium Enterprises (SMEs) across Nigeria are facing mounting operational challenges as rising fuel costs and persistent inflation continue to erode profit margins and threaten business sustainability.
Operators say the sharp increase in petrol and diesel prices has significantly driven up the cost of production, logistics, and power generation, forcing many businesses to either scale down operations or pass on additional costs to already strained consumers.
The development comes amid broader inflationary pressures that have weakened consumer purchasing power, further reducing demand for goods and services in key segments of the economy.
Findings indicate that SMEs, which rely heavily on alternative power sources due to unreliable electricity supply, are among the hardest hit, as energy costs now account for a substantial share of their operating expenses.
A business owner in Lagos said the situation has become increasingly difficult. “We spend more on fuel than on raw materials some days. It’s no longer sustainable, and customers are not buying as before because prices have gone up,” he said.
Industry stakeholders warn that without urgent intervention, the situation could lead to widespread business closures, job losses, and a slowdown in economic activity, given the critical role SMEs play in employment generation and economic growth.
According to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), SMEs account for a significant share of Nigeria’s workforce, making their survival essential to economic stability.
Economists note that the combined effect of high energy costs and inflation has created a double burden for small businesses, limiting their ability to reinvest, expand, or even maintain current operations.
A financial analyst, Johnson Chukwu, said the pressure on SMEs reflects broader structural challenges within the economy.
“Energy costs are a major constraint for businesses, especially small enterprises. When you combine that with inflation and weak consumer demand, it creates a very difficult operating environment,” he said.
Stakeholders are calling on the government to introduce targeted support measures, including energy subsidies for small businesses, improved access to credit, and policies aimed at stabilising fuel prices.
They also emphasise the need to address underlying issues in the power sector to reduce dependence on generators, which continue to drive up operating costs for businesses nationwide.
While some businesses are exploring cost-cutting measures and digital alternatives to remain afloat, many operators say these efforts offer only temporary relief in the face of sustained economic pressures.
As inflation persists and energy costs remain elevated, SMEs warn that their ability to survive—and by extension contribute to Nigeria’s economic growth will depend largely on the speed and effectiveness of policy interventions aimed at easing the burden.
