MSMEs to initiate survival strategies amid fuel price hike

• Published On: 09 September 2024 at 18:48

The recent increase in the price of premium motor spirit in Nigeria has prompted the Association of Small Business Owners of Nigeria to implement survival strategies to avoid the extinction of small businesses.

This move comes after warnings from the Manufacturers Association of Nigeria and ASBON about the potential negative effects of rising fuel costs, which could lead to reduced operations or even shutdowns of manufacturing companies and micro, small, and medium-sized businesses across the country, according to Vanguard.

Dr. Femi Egbesola, President of ASBON, commented on the development, saying, "For us in the MSME sector, the way out now is to focus not on what the government will do for us, because we have no control over that, but on what we can do for ourselves.

"So, we as an association have been building the capacity of our business community to be more innovative and creative with our products, businesses, 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 imported products, explore exports to open up more markets and earn foreign currency, improve on our packaging with a special focus on small and light packag

MAN and ASBON have identified a number of potential consequences of the fuel price increase, including inflation, higher production and logistics costs, low demand, rising inventory, and job losses.

Segun Ajayi-Kadir, Director General of MAN, stated, "In terms of what the impact might be, and based on what we've seen in the past, the cost of transport may rise, as will the prices of goods and services. These indicators point to a high likelihood of an increase in inflation, which will have an impact on household budgets.

"One is naturally concerned about the impact on the already poor performance of the manufacturing sector. There is no doubt that it will increase production and logistics costs. These will result in higher prices, and given the average Nigerian's dwindling disposable income, a further drop in consumer demand will see manufacturers' unplanned inventory rise and capacity utilisation fall.

"The manufacturing performance would be impacted negatively. Businesses may need to adjust their pricing strategies, which could result in lower profit margins if consumer demand falls. Small and medium-sized enterprises (SMEs), which frequently operate on thin margins, could be especially hard hit. Increased costs may force some businesses to scale back or even close if they are unable to pass on the additional costs to customers."

In his remarks, Egbesola stated, "For MSMEs, this increase is another significant blow. Many millions of small businesses have already failed. Many more are ill and struggling to survive. This development will negatively impact MSMEs and their profitability.It is impossible to pass on the majority of the price increase to consumers, whose disposable incomes have already been depleted to the breaking point."