High cost of diesel frustrating SMEs

The recent increase in the price of diesel across the federation is frustrating micro, small and medium enterprises (MSMEs), which depend on the product as an alternate power supply due to constant power outage.

Power remains a big infrastructural challenge in Nigeria, with its deficit increasing operational cost for SMEs and reducing their production capacities, analysts say. This has continued to make Nigerian goods uncompetitive while killing local industries, especially SMEs among them.

“The high cost of diesel is so frustrating. I need electricity to power the machines I use for my rhinestone business,” said Tolulope Adebukola, founder and CEO of Pawprint Limited.

“I normally buy a litre of diesel between N170 to N180, but now it sells between N200 to N220,” Adebukola said.

Demand for diesel is rising higher with per litre price now beyond N200 in many filling stations. Stakeholders in the oil and gas sector have blamed the recent increase in the price of diesel on market forces.

Adetunji Oyebanji said the rise in the price of diesel is the result of market forces at play. According to Oyebanji, there are fewer people importing diesel due to its high cost in the international market.

Sectors such as manufacturing, finance, services, health, education, government agencies and homes depend on diesel-powered generators as the power crisis bites harder.

“The high cost of diesel has eroded a lot of our capital and it implies that more SMEs will close shop. The economic environment is getting tougher,” Femi Egbesola, national president, Association of Small Business Owners (ASBON), said in a telephone response to questions.

“This makes products of SMEs less competitive, coupled with increase in the price of raw materials for production,” Egbesola said.

Egbesola called on the government to intervene to mitigate the plight of small businesses by providing adequate power supply and enabling environment so that businesses can survive.

“High cost of doing business, particularly as it relates to inputs, is the reason Nigerian goods are not competitive. For instance, power in Nigeria is more than 20 cent per kilowatts; Ethiopia is three cents; Egypt is three cents, while South Africa is four cents, but ours is much higher. How then can Nigerian goods compete?,” asked H.A Kwajaffa, director general, Nigeria Textile Garment and Tailoring Employers Association.

Emeka Ude, small business analyst, told Start-Up Digest that the situation calls for state of emergency, asking the government to initiate policies that will encourage small businesses.

“This class of business creates more jobs than large enterprises, so they need support. What we have seen so far is governments at various levels milking from SMEs, rather than supporting them with incentives. Yes, they need to pay taxes, but they also need to see that government cares for them,” Ude said.