In light of the recent increase in the price of premium motor spirit (PMS), commonly referred to as petrol, small business owners, represented by the Association of Small Business Owners of Nigeria (ASBON), are implementing survival strategies to avoid potential extinction.

This decision follows alerts from the Manufacturers Association of Nigeria (MAN) and ASBON, indicating that the fuel price hike may result in reduced operations and possible closures of numerous manufacturing firms and micro, small, and medium enterprises (MSMEs) across the nation.

In an exclusive interview with Vanguard, ASBON President Dr. Femi Egbesola remarked, “For those of us in the MSME sector, our focus should not be on what the government can provide, as we have no control over that. Instead, we must concentrate on what we can manage ourselves.”

He further explained that the association is enhancing the capabilities of its business community to foster innovation and creativity in their products, business practices, and models.

This includes diversifying into essential goods, particularly in the food sector and its value chain, working towards standardization to enhance competitiveness against imported goods, exploring export opportunities to access new markets and generate foreign currency, improving packaging with an emphasis on smaller, lighter options, and leveraging technology to minimize transportation and operational costs, as well as to boost productivity, visibility, and marketing efforts.

“We in the MSME sector are committed to navigating these challenges with a clear objective to survive, grow, and expand.”

Additionally, MAN and ASBON informed Vanguard that the rise in fuel prices could trigger further inflation, increased production and logistics costs, decreased demand, rising inventory levels, and ultimately, job losses.

Segun Ajayi-Kadir, the Director General of MAN, expressed concerns regarding the potential impacts of recent developments. He noted that, based on historical trends, transportation costs are likely to rise, which will subsequently lead to increased prices for goods and services. This situation suggests a significant risk of inflation, which could strain household budgets.

He highlighted the ongoing challenges faced by the manufacturing sector, emphasizing that rising costs for production inputs and logistics will further exacerbate the situation.

This could result in higher prices, and with the average Nigerian's disposable income declining, there may be a decrease in consumer demand. Consequently, manufacturers could experience an accumulation of unsold inventory and a reduction in capacity utilization.

Ajayi-Kadir remarked on the fluctuations in petrol consumption, noting a drop to 30 million liters daily, followed by a sharp increase to over 60 million liters.

He warned that the manufacturing sector would likely suffer as businesses may need to revise their pricing strategies, potentially leading to lower profit margins if consumer demand falters. Small and medium-sized enterprises (SMEs), which typically operate with limited margins, could be particularly vulnerable.

The rising costs might compel some businesses to downsize or even cease operations if they cannot transfer these expenses to consumers.

Egbesola added that for micro, small, and medium enterprises (MSMEs), this price increase represents a significant setback. Many small businesses are already struggling, and this development could lead to further closures and diminished profitability for those that remain.

He pointed out the difficulty of passing on substantial price hikes to consumers whose disposable income is already severely constrained.