Fuel scarcity bites start-ups
Newly established businesses, otherwise known as start-ups, are hard hit by fuel scarcity, which is threatening to keep them out of business.
“I established my agro-processing business two years ago. I have two generators and often buy between four and ten litres of fuel to power them, every day. Before, I used to buy a litre of fuel at between N100 and N130 at filling stations or black markets, but this is not happening now. I now buy at N300 or N350 a litre, meaning that I spend much more just on energy each day,” said James Jaiyeola, managing director of C.C. Foods based in Lagos.
Africa’s biggest oil producer faces an acute fuel shortage, which has raised the price of Premium Motor Spirit (PMS) by over 300 percent at the black market. The situation has paralysed movements and businesses in mega cities like Lagos and Abuja, as long queues cause perennial traffic gridlocks.
Black marketers wake up as early as 2am, buy from filling stations and sell at exorbitant rates to desperate motorists, who have an option of staying themselves for long hours at filling stations, if they wish to buy at lower prices (often above N200). But the motorists are usually caught between the devil and the deep blue sea, as many filling stations do not have fuel to sell.
“Another challenge is that when I calculate how much I spend on energy now, I find out that I will have to struggle to pay the two staff members I have,” said Tochukwu Udorji-Odo, owner of a one-year online marketing firm.
Udorji-Odo said she used to put on her generator for six straight hours when all was well, but now puts it off and on when she needs to do some important work.
Nigeria’s businesses are reputed for dying within two and three years of establishment. Part of the reason for this is high energy spend, which forms between 30 and 40 percent of the total expenditure.
“Energy cost to businesses here is very high. Not all businesses can survive spending between 30 and 40 percent on energy,” said Usman Ibrahim, chairman, Manufacturers Association of Nigeria (MAN) Infrastructure Committee and vice president of MAN in the north-east zone, at an exhibition in Lagos.
Fuel scarcity has continued to bite businesses as Nigeria’s federal government refuses to liberalise the petroleum downstream sector.
In order to forestall closure of small businesses, especially start-ups, the Lagos Chamber of Commerce and Industry (LCCI) said private sector participation in the downstream petroleum industry is the only way out.
“The prolonged scarcity of petrol [PMS] in the past few weeks has taken a major toll on business. Apart from the considerable loss of man-hours as a result of long fuel queues and associated traffic issues on the highways, the fuel scarcity challenge also promotes proliferation of black market,” Nike Akande, president, LCCI said in Lagos last Thursday.
“Therefore, there is urgent need for the government to liberalise the downstream petroleum sector for unfettered private sector participation and investment. This would improve efficiency, attract more investment, generate more jobs and reduce the pressure on the country’s foreign reserves,” Akande added.
With the high energy spend, small business owners often transfer the burden on cash-strapped Nigerian consumers, who have to bear the brunt.
“What else do you want us to do?” asked Frank Umeh, a small-scale player in the pharmaceutical sector in Enugu, South-East of the country.
“I have to add some money to make both ends meet. Otherwise I won’t make profits. But then, people weren’t buying when fuel prices were low, and it’s hard convincing them to keep patronising you now when they have no money,” Umeh explained.
ODINAKA ANUDU