The recent hike in the price of premium motor spirit in Nigeria has prompted the Association of Small Business Owners of Nigeria to implement survival strategies to prevent the extinction of small businesses.
This move follows warnings from the Manufacturers Association of Nigeria and ASBON about the potential negative impacts of rising fuel costs, which could result in reduced operations or even shutdowns of manufacturing companies and micro, small, and medium enterprises across the country, according to Vanguard.
Commenting on the development, ASBON President, Dr. Femi Egbesola, said “For us in the MSME sector, the way out now is focusing not on what the government will do for us, for we don’t have control over that but rather focusing on what we have control on, that is, what we can do for ourselves.
“So, we as an association has been building the capacity of our business community to be more innovative and creative with our products, business and business models, diversify to basic needs products, particularly food and its value chain, work on standardisation as it makes us more competitive, particularly with the imported products, explore exports to open up more markets and earn foreign currency, improve on our packaging with special focus on small and light packages, adopt technology to reduce transportation, general costs, logistics, use of manpower/staff and to use technology to improve productivity, visibility, marketing, etc.
“We in the MSME community are determined to keep navigating these uncertainties with the clear goal and focus to survive, grow and scale.”
MAN and ASBON have highlighted several potential consequences of the fuel price increase, including inflation, increased costs of production and logistics, low demand, rising inventory, and consequent loss of jobs.
Director General of MAN, Segun Ajayi-Kadir, said “In terms of what the impact might be and judging from what we have witnessed in the past, the cost of transportation may increase, and so would the prices of goods and services. These are pointers to the high possibility of a rise in inflation figures, impacting household budgets.
“One is naturally worried about the impact on the already lackluster performance of the manufacturing sector. In particular, there is no doubt that it will add to production input and logistics costs. These will lead to higher prices and in the face of dwindling disposable income of the average Nigerian, a further deep in consumer demand will see manufacturers’ unplanned inventory rising and reduction in capacity utilisation.
“Manufacturing performance would be negatively impacted. Businesses may need to adjust their pricing strategies, which could lead to reduced profit margins if consumer demand weakens. SMEs, which often operate on thin margins, could be particularly hard-hit. The increased costs could force some to scale down operations or even shut down if they are unable to pass on the additional costs to consumers.”
In his remarks, Egbesola, said “For MSMEs, this increase is another big blow. Quite a number in millions of small businesses are dead already. Many more are ailing and struggling to survive. This development will definitely cause more deaths of MSMEs and reduce the profitability of the existing ones.
“It’s impossible to pass the bulk of the price increase to consumers whose disposable income is already depleted to a breaking point.”
