Small businesses face survival crisis as fuel hike, unstable power bite

…Experts warn of deepening MSMEs crisis despite FG’s N1bn award scheme

…Nigerian SMEs need structural reforms, not lottery grants

Small and medium-scale business operators across Nigeria are increasingly warning of a deepening survival crisis driven by rising fuel prices, unstable electricity supply, and escalating operating costs, with experts cautioning that recent government intervention schemes may not address the structural challenges facing the sector.

Across Abuja and other major cities, business owners say the combination of expensive diesel and petrol, frequent power outages, and inflationary pressures is eroding already thin profit margins, forcing many to scale down operations or shut down entirely.

In the Idu area of the Federal Capital Territory, Precious Iheanachi, who runs a provision store dealing in frozen foods, described the past four days of power outage as devastating to her business.

“These past four days without light have not been funny on my business. I sell frozen foods like chicken and sausages. Because of unstable power, I have lost over a hundred thousand naira worth of protein. It was painful throwing away goods worth that amount,” she said

She added that she now spends about N15,000 daily on fuel to power a generator, a cost she says is rapidly wiping out her profit.

“You can imagine what that amounts to in a week or a month. It will definitely tell on my profit,” she said, adding that she is considering installing solar panels but is constrained by high costs and property approval processes.

In the fashion industry, similar concerns are being echoed. Moses Adeyemi, CEO of Bash Heritage Fashion House, said the cost of production has become “unreasonable and unsustainable” for small businesses.

He noted that the price of sewing machines has surged dramatically, with equipment that previously cost around N150,000 now selling for as much as N450,000.

“Transportation, fabric sourcing, and delivery are all more expensive. Fuel to run generators is very costly. When you calculate everything, you realize your profit margin is almost gone.

“Making clothes in Nigeria is quite expensive and quite unaffordable for small businesses,” he said

Adeyemi expressing his frustration added that ‘It’s crazy. From point A to point B, to go and search for fabric, to even deliver clothes to customers. It’s so, so alarming. Foil, to run power, because our supply is not stable. To run power, that is you getting fuel to get power. It’s very expensive.

“When they put all these things into consideration, calculate all these means of production, you find out that your means of production is heavily affecting your own profits. The profit margin is so low and it’s quite very sad,”

Recent increases in fuel prices have further worsened the situation. Filling stations across Abuja now sell petrol at significantly higher rates than earlier in the year. The Nigerian National Petroleum Company Limited is reportedly selling at about N1,364 per litre, while major marketers such as MRS, BOVAS, Ardova (AP), and Mobil range between N1,364 and N1,370 per litre.

Other outlets, including Optimum, AA Rano, Emedab, Empire Energy, and Ranoil, are selling between N1,370 and N1,444 per litre.

The ripple effect has been severe for businesses dependent on logistics, electricity generation, and daily transportation.

Economic analysts say these pressures are compounding an already fragile MSME ecosystem. Nigeria’s small and medium enterprises face an estimated N13 trillion financing gap, while commercial lending rates remain between 27% and 32%.

Despite contributing nearly half of the country’s GDP and employing the vast majority of the workforce, the sector continues to struggle with high failure rates, over 50% within the first year and up to 95% within five years, according to industry data.

Between January 2023 and June 2024 alone, approximately 8 million businesses are reported to have shut down, highlighting the severity of the operating environment.

Reacting to these developments, Dele Kelvin Oye, Chairman of the Alliance for Economic Research and Ethics, warned that Nigeria’s MSME sector is being undermined by what he described as superficial policy responses rather than structural reforms.

He criticised the Federal Government’s planned N1 billion MSME Awards initiative, arguing that while it may appear supportive, it does little to address underlying economic constraints.

“What Nigerian SMEs need is not a lottery. They need stable, predictable, and business-friendly policies. They need access to affordable credit, stable electricity, and macroeconomic stability, not competitive grant schemes that benefit only a handful of winners,” he said

Oye argued that Nigeria’s MSME sector requires deep institutional reforms, including stronger support for SMEDAN, expanded access to Bank of Industry funding, and sustained investment in infrastructure and power supply.

He also noted that international development partners have made significantly larger commitments to the sector, including a $500 million World Bank intervention and a $1 billion African Development Bank support package aimed at expanding MSME financing.

“These are systemic interventions. They build frameworks and capacity. What we need is long-term stability, not symbolic gestures,” he said.

As pressure mounts on small businesses, stakeholders are calling for urgent reforms to address power supply challenges, reduce production costs, and stabilize the macroeconomic environment.