Power Crisis  Suffocates  SMEs As Energy Costs Gulp  60% of Profits

Small and Medium Enterprises (SMEs) in Nigeria are grappling with worsening operating conditions as surging energy costs continue to erode profitability, the President of the Association of Small Business Owners (ASBO), Femi Egbesola, has said.

He warned that many businesses are shutting down or scaling back operations due to the rising cost of fuel and unreliable electricity supply.

According to him, energy expenses now consume as much as 60 per cent of SMEs’ profits, up from an average of about 40 per cent previously.

“Energy is central to business survival. When costs rise sharply, the impact is devastating, especially for businesses operating on thin margins,” he said.

Egbesola noted that many operators can no longer sustain the cost of running generators, forcing them to reduce output and depend on inconsistent public power supply.

“It is alarming that a business spends up to 60 per cent of its profit on electricity. This is why many now operate below capacity, as generator use has become unsustainable,” he added.

He explained that while some businesses attempt to pass increased costs to consumers, weak purchasing power has resulted in declining sales and shrinking margins.

Egbesola stressed that improving electricity supply would significantly reduce the burden on SMEs and enhance productivity across sectors.

He also urged the Federal Government to introduce temporary subsidies on diesel and other energy sources to prevent further business closures and job losses.

“Businesses are under severe strain. Some owners have shut down and turned to menial jobs, including commercial motorcycle riding, just to survive. With diesel prices rising by nearly 100 per cent, urgent government intervention is needed,” he said.

He warned that persistently high energy costs could undermine Nigeria’s global competitiveness, as higher production costs translate into more expensive goods and reduced export potential.

“When production costs rise, our goods become less competitive internationally. This affects foreign exchange earnings and puts pressure on the naira,” he added.

Egbesola called for practical solutions, including expanded access to Compressed Natural Gas (CNG), increased adoption of renewable energy, and tax incentives for businesses investing in alternative power sources.

He also urged the government to support local production of renewable energy technologies to make them more affordable and accessible for SMEs.

“We were told subsidy savings would support CNG alternatives, but that has yet to happen. The government must act quickly to provide viable options,” he said