The Centre for the Promotion of Private Enterprise (CPPE) has warned that the sharp rise in global energy prices, driven largely by geopolitical tensions in the Middle East, poses a serious threat to the survival of Nigerian businesses.

In an advisory note titled “Mitigating the Impact of Energy Cost Escalation: What Businesses and Government Should Do,” the economic think tank said Nigerian enterprises remain highly vulnerable to shocks in the global energy market due to their heavy dependence on petrol and diesel for power generation.

The advisory, signed by CPPE’s Chief Executive Officer, Dr.  Muda Yusuf, noted that business resilience will depend largely on improving energy efficiency, diversifying energy sources, strengthening financial management, and improving logistics efficiency.

According to the centre, the crisis also highlights the urgency for the government to accelerate reforms in electricity supply, expand renewable energy adoption, and strengthen domestic refining capacity.

Global crude oil prices have surged to around $100 per barrel following the sustained conflict in the Middle East and disruptions to crude shipments through the Strait of Hormuz. The spike has pushed the cost of refined petroleum products in Nigeria to over N1,000 per litre, intensifying cost pressures on businesses.

The CPPE noted that the situation is particularly severe in Nigeria where companies rely heavily on generators due to persistent electricity supply challenges, while also facing rising transportation and distribution costs linked to higher fuel prices.

“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”, the centre said.

It added that businesses are already grappling with several macroeconomic challenges, including high inflation, elevated interest rates, and weak consumer purchasing power.

“The latest escalation in energy costs therefore compounds an already challenging operating environment. Without deliberate adjustments by businesses and supportive policy interventions from the government, rising energy costs could significantly erode profit margins, weaken business sustainability and dampen economic growth”,  the advisory stated.

To mitigate the impact, the CPPE urged companies to prioritise energy efficiency as the fastest and most cost-effective response to rising fuel costs.

“Firms should undertake a comprehensive review of their energy consumption patterns with the objective of minimizing waste and maximizing productivity per unit of energy used,” the centre said.

It advised businesses to optimise generator operating hours, deploy energy-efficient machinery, strengthen internal energy management practices, and encourage energy conservation among staff.

The centre also stressed the importance of diversifying energy sources, noting that Nigerian firms remain excessively dependent on petrol and diesel generators.

Businesses were encouraged to gradually explore alternative energy solutions such as solar power systems, hybrid energy systems that combine solar with generators, and gas-powered generators where gas infrastructure is available.

“While the upfront investment cost may appear significant, the long-term savings from renewable and hybrid energy solutions are becoming increasingly compelling in the face of persistently high fuel prices,” the advisory said.

Other recommended measures include improving logistics and supply chain efficiency, adopting flexible pricing strategies, strengthening cash flow and financial management, and leveraging cluster-based energy solutions.

For the government, CPPE recommended expanding fiscal and regulatory incentives to support businesses in adopting renewable energy solutions. These include tax incentives for solar installations, import duty waivers on renewable energy equipment, and fiscal support for investments in energy-efficient technologies.

The centre also called for affordable financing for energy transition projects, stronger domestic refining capacity, and improved electricity supply reliability to ease the structural energy cost burden on Nigerian businesses.