CPPE outlines survival strategy for government, businesses as energy costs skyrocket

By Merit Ibe

The Centre for the Promotion of Private Enterprise (CPPE) has warned that the sharp rise in global energy prices is putting intense pressure on Nigerian businesses, urging both companies and government authorities to take urgent steps to reduce the impact on the economy.

In an advisory note issued by its Chief Executive Officer, Muda Yusuf on Sunday, the organisation said escalating geopolitical tensions in the Middle East have pushed global energy prices higher, worsening the cost of doing business in Nigeria where firms already rely heavily on petrol and diesel to power operations.

According to CPPE, the situation is particularly difficult for small and medium enterprises (SMEs) that depend largely on generators due to unreliable electricity supply.

The think tank noted that the surge in fuel prices has significantly increased operating costs, squeezed profit margins and heightened the risk of business closures.

“The current surge in global energy prices, driven by escalating geopolitical tensions in the Middle East, has intensified cost pressures for businesses across many economies,” the advisory stated.

It added that Nigeria faces an even tougher situation because companies depend heavily on petrol and diesel for electricity while also dealing with higher transportation and distribution costs.

The organisation explained that the rising cost of energy is hitting businesses at a time when they are already struggling with several economic challenges, including high inflation, elevated interest rates and weak consumer purchasing power.

“The combined effect is a significant escalation in operating expenses, mounting pressure on profit margins, and heightened risks to business sustainability, particularly for small and medium enterprises,” CPPE stated.

To cope with the rising energy costs, the think tank urged businesses to adopt practical strategies that can reduce fuel consumption and improve operational efficiency.

One of the key recommendations is improving energy efficiency.

According to CPPE, businesses should carefully examine how they consume energy and take steps to reduce waste.

“Improving energy efficiency remains the quickest and most cost-effective strategy for businesses to manage rising energy costs,” the organisation said.

It advised firms to optimise generator operating hours, adopt energy-efficient equipment and encourage staff to conserve power.

The advisory also stressed the importance of diversifying energy sources.

Many Nigerian businesses depend almost entirely on petrol or diesel generators for electricity, making them vulnerable to fuel price fluctuations.

CPPE, therefore, encouraged companies to explore alternatives such as solar power systems, hybrid energy solutions that combine solar with generators, and gas-powered generators where gas infrastructure is available.

While these options may require significant upfront investment, the organisation said they offer long-term cost savings, especially in an environment of persistently high fuel prices.

Improving logistics and pricing strategies

The think tank also advised companies to review their logistics and supply chain operations in order to reduce transportation costs.

Measures such as consolidating deliveries, optimising transport routes, improving fleet management and using shared logistics platforms can significantly reduce fuel consumption.

In addition, businesses may need to adjust their pricing structures to reflect rising operating costs.

However, CPPE cautioned that such adjustments should be carefully managed in order not to drive customers away in a fragile consumer market.

It suggested gradual price increases, improved product value and innovative packaging strategies such as smaller product sizes.

The organisation further urged firms, especially SMEs, to strengthen financial management and maintain adequate liquidity buffers to withstand temporary cost shocks.

Beyond business-level strategies, CPPE also called for stronger government intervention to help ease the energy burden on companies.

One key recommendation is expanding incentives that encourage the adoption of renewable energy.

The organisation proposed tax incentives for solar installations, import duty waivers for renewable energy equipment and fiscal support for investments in energy-efficient technologies.

CPPE also stressed the need for affordable financing to help businesses transition to cleaner and cheaper energy sources.

It urged government, development finance institutions and commercial banks to establish special financing windows that would enable SMEs to invest in renewable energy solutions and energy-efficient machinery.

Another critical area highlighted in the advisory is the need to strengthen Nigeria’s domestic refining capacity.

According to the organisation, expanding local refining and ensuring steady crude oil supply to refineries would reduce dependence on imported petroleum products and shield the economy from global supply shocks.

CPPE noted that domestic refining could also reduce the country’s demand for foreign exchange used to import fuel and improve Nigeria’s trade balance.

However, the organisation stressed that the most sustainable solution to high energy costs in Nigeria lies in improving electricity supply across the country.

It urged government to accelerate efforts to increase power generation, strengthen transmission infrastructure and improve the efficiency of electricity distribution networks.

CPPE said a reliable electricity supply would significantly reduce the heavy dependence of businesses on diesel and petrol generators, which currently account for a large share of operating costs.

“The most sustainable solution to Nigeria’s high energy cost environment lies in improving the reliability and availability of grid electricity,” the advisory stated.

According to the organisation, combining proactive business strategies with supportive government policies will help Nigeria reduce the impact of the current global energy price shock while strengthening the resilience and competitiveness of its business environment.