• Friday, December 08, 2023
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BusinessDay

Entrepreneurs struggle as cost of doing business surges

Entrepreneurs shortlisted for EY awards

Nigerian entrepreneurs are struggling to stay in businesses as cost of operations continues to surge, limiting their expansion and margin.

Energy prices have soared since Russia invaded Ukraine in February, raising costs for firms in Nigeria, where businesses rely on diesel-fired generators to power their operations due to unstable public electricity supply.

The price of Automotive Gas Oil, popularly known as diesel, has soared by almost 212.5 percent year to date to N900 per litre from N288 in January, forcing some firms to restructure their production hours, while others completely shut down operations.

BusinessDay interviewed some entrepreneurs who shared their struggle with the recent surge in diesel prices amid epileptic power supply. Here are their responses.

Bosu Opeyemi

Opeyemi Gladys is the founder of Gladyskitchen – a small medium enterprise that sells food in bowls and bakes cakes for large and small events. Her business operates in Lagos, Abeokuta and Ibadan.

How are you coping with the rising input costs?

I do not think I have a choice when it comes to coping with the increasing cost of production. I have to find one way or another to adapt. As for me, a little increase in the price of my products is what I went for.

For example, I used to sell a bowl of soup for N7000. But now, I have increased it to N9000. For my cakes, I increased each size by N1500.

Are you making more money compared to before?

Am I making more money? No. This is because the things we were getting for a particular price back then are now four times the amount. The record high inflation and FX are limiting investment for my business. With a higher investment, we are not even making up for the former profit we earned.

Are customers buying your products?

Despite the unbearable Nigerian economy, my local customers still purchase my products.

How is the worsening power supply affecting your cost of production?

In my area, Ipaja, Lagos, poor power supply affects the productivity of my business, as I stick to a petrol generator. The more power is stable, the more profit I can make, compared to the use of a generator.

Read also: QNET spurs Nigerian entrepreneurs to tap global $9trn e-commerce market

What strategy did you adopt as a business to survive the COVID-19 pandemic?

While supplying my products to my customers, I had to enforce social distancing and the use of nose masks by the people that supply products, so that my customer base does not reduce. This helped scale through the pandemic era.

Is the Nigerian business environment improving?

I do not think doing business in Nigeria is improving because inflation keeps rising. This development demotivates business owners, especially start-ups.

Sharon Samo

Samo is the founder of Adetutu the Brand- a clothing brand that manufactures women’s wear, operating in the Lagos metropolitan. She also sells her products online, via social media platforms like Instagram.

How are you coping with the rising input prices?

The current inflation has really affected the effectiveness of our production. Materials are more expensive, making it difficult to purchase them in large quantities. Materials that used to be N1000 per yard are now sold at N1500 per yard.

This leads us to use low-quality materials that are more affordable.

Are you making more money compared to before?

No. We are not making money compared to before due to the high cost of production. Most times, we are left with little or no profit.

Are customers buying your products?

When it comes to sales, the situation is frustrating. Inflation has both affected our business and customers. The increase in expenses on production has forced us to increase the price of our products.

Sadly, some of our customers are leaving because they cannot afford my products.

How is the worsening power supply affecting your cost of production?

The poor power supply is really affecting our cost of production, because as a fashion brand, we make use of a lot of electronics like sewing machines, iron, weeping machines, among others. However, we have no choice but to make use of our petrol generator, which is another expense.

What strategy did you adopt as a business to survive the COVID-19 pandemic?

Luckily for me, my business started after the COVID-19 pandemic.

Is the Nigerian business environment improving?

In my opinion, I do not think the Nigerian business environment is improving, because there are different factors negatively affecting the growth of business in Nigeria, like FX, inflation, unstable power supply, and funding.