Nigeria’s fuel subsidy removal is already putting significant pressure on businesses, particularly small and medium enterprises battling double taxation and high operating costs.
The Bola Ahmed Tinubu-led government effectively implemented the removal of fuel subsidy as enshrined in the Petroleum Industry Act 2021. Just as expected, the prices of transportation and commodities have surged.
Prices of petrol in Abuja and Lagos are sold at the average of N520 and N480 respectively and in state like Borno, petrol cost over N550. Foreign exchange reforms that would drive the naira to trade over N600/USD is also imminent.
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An expert, Dr. Steve Olusegun Ogidan MNI, who is the Managing Director and Chief Executive Officer of Successory Team, admitted that irrespective of the merits of the subsidy removal, businesses will have to adjust to rising prices.
It is estimated that inflation would surge to 30 per cent according to KPMG while other analysts argue that it may hit 50 per cent.
In an advisory post targeted at business, Ogidan, the CEO of Global Knowledge Consulting Group, is helping businesses map out ways to mitigate the effects and ensure the effective running of businesses.
𝗘𝘃𝗮𝗹𝘂𝗮𝘁𝗲 𝗮𝗻𝗱 Ad𝗷𝘂𝘀𝘁 𝘁𝗿𝗮𝗻𝘀𝗽𝗼𝗿𝘁𝗮𝘁𝗶𝗼𝗻 C𝗼𝘀𝘁𝘀
Ogidan said with “increased fuel prices, transportation costs have been on the increase too. Therefore, you need to optimize delivery routes, use more fuel-efficient vehicles, and negotiate favorable contracts with transportation providers.
“You can also consider having your employees work remotely or take shifts or consider passing on a portion of the increased costs to customers through adjusted pricing.”
𝗜𝗺𝗽𝗹𝗲𝗺𝗲𝗻𝘁 E𝗻𝗲𝗿𝗴𝘆-E𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝘁 P𝗿𝗮𝗰𝘁𝗶𝗰𝗲𝘀
According to the CEO, fuel costs may lead to increased electricity tariffs in Africa’s biggest economy.
He said, “You can minimize the impact by using energy-saving appliances, optimizing lighting systems, and properly insulating buildings. This can help reduce electricity consumption and lower energy bills.”
𝗘𝘅𝗽𝗹𝗼𝗿𝗲 A𝗹𝘁𝗲𝗿𝗻𝗮𝘁𝗶𝘃𝗲 E𝗻𝗲𝗿𝗴𝘆 S𝗼𝘂𝗿𝗰𝗲𝘀
He noted that, in addition to energy efficiency, businesses could consider investing in renewable energy sources such as solar panels or wind turbines.
He acknowledged that “initial investment may be significant, but the long-term benefits can help offset rising fuel and electricity costs.”
𝗘𝗺𝗯𝗿𝗮𝗰𝗲 T𝗲𝗰𝗵𝗻𝗼𝗹𝗼𝗴𝘆 𝗮𝗻𝗱 A𝘂𝘁𝗼𝗺𝗮𝘁𝗶𝗼𝗻
On embracing technology, he said “You can consider using technologies and automation to streamline processes such as online collaboration and communication tools, inventory management software and e-commerce platforms, cloud computing and storage which promote remote work capabilities, etc.
“While this is getting too long, I will share other contingency plans in my next post. However, kindly note that these plans vary depending on the nature of your business.”
𝗡𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗲 W𝗶𝘁𝗵 S𝘂𝗽𝗽𝗹𝗶𝗲𝗿𝘀 𝗮𝗻𝗱 V𝗲𝗻𝗱𝗼𝗿𝘀
He said businesses should open discussions with suppliers and vendors in a bid to negotiate better terms and prices.
“Exploring alternative suppliers or consolidating orders with fewer vendors can result in bulk discounts or better pricing arrangements,” he added.
𝗗𝗶𝘃𝗲𝗿𝘀𝗶𝗳𝘆 P𝗿𝗼𝗱𝘂𝗰𝘁 O𝗳𝗳𝗲𝗿𝗶𝗻𝗴𝘀 𝗼𝗿 T𝗮𝗿𝗴𝗲𝘁 N𝗲𝘄 𝗺𝗮𝗿𝗸𝗲𝘁𝘀
According to him, businesses should identify untapped customer segments and diversity their product offerings to increase revenue.
𝗠𝗼𝗻𝗶𝘁𝗼𝗿 𝗮𝗻𝗱 M𝗮𝗻𝗮𝗴𝗲 In𝘃𝗲𝗻𝘁𝗼𝗿𝘆 E𝗳𝗳𝗲𝗰𝘁𝗶𝘃𝗲𝗹𝘆
For him, businesses should monitor inventory levels and implement efficient inventory management systems.
“This means that you need to minimize stockouts and avoid overstocking. This way, you can optimize cash flow, reduce storage costs, and avoid unnecessary losses.”
𝗙𝗼𝗰𝘂𝘀 o𝗻 C𝘂𝘀𝘁𝗼𝗺𝗲𝗿 R𝗲𝘁𝗲𝗻𝘁𝗶𝗼𝗻 𝗮𝗻𝗱 Lo𝘆𝗮𝗹𝘁𝘆
The Successory Team CEO noted that it is paramount for businesses to retain existing customers.
He also said businesses must look for means to foster brand loyalty which could “help you minimize the impact of price increases and maintain a stable customer base.”