When Emmanuel Adeyemi opened his cold-storage and logistics business in Lagos five years ago, he budgeted for fuel as a minor line item, a backup for when the national grid flickered.
Today, diesel accounts for nearly 40 percent of his monthly operating costs, and the arithmetic is getting worse by the quarter.
“I am not competing with my rivals in my sector anymore,” said Adeyemi, whose company stores and distributes pharmaceuticals for hospitals across Nigeria’s commercial capital. “I am competing with the fuel pump. Every time the price goes up, I have to decide: do I pass it on to my clients, or do I absorb it and die slowly?”
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His predicament captures a compounding crisis now gripping Nigerian businesses of all sizes. After years of government fuel subsidies keeping petrol prices artificially low, their removal in 2023 sent prices soaring, a shock that has not let up.
Petrol, which once sold for under N200 per litre, now trades at more than N1,200 in many cities. Diesel, which powers virtually every generator in the country’s commercial and industrial sector, has tracked a similar trajectory, now hovering around N1,400 per litre in Lagos markets.
For businesses in wealthy economies, rising fuel costs are painful but manageable, a problem to be hedged, passed along in pricing, or mitigated through energy efficiency.
In Nigeria, the mathematics are entirely different, because unreliable grid electricity means that fuel is not a backup; it is the primary power source for nearly every enterprise that hopes to operate consistently.
Nigeria’s electricity grid, which serves Africa’s largest economy and most populous nation, generates roughly 4,000 megawatts of power on a good day, a fraction of what a country of more than 220 million people requires.
South Africa, with a population less than a quarter the size, regularly generates more than twice that. Frequent transmission failures, ageing infrastructure, and chronic underfunding of the sector mean that even available generation rarely reaches end users reliably.
“The grid gives us maybe three to four hours a day,” said Ngozi Eze, who manages a mid-sized textile manufacturing firm. “The rest of the time, if you want to work, you are burning diesel. And with what diesel costs now, every hour of production has become something we calculate carefully.” Her firm, which once ran three production shifts daily, has cut back to two, and is considering whether the third will ever return.
The Manufacturers Association of Nigeria estimates that its members collectively spend over $1 billion annually on self-generated power, a private tax on productivity that falls entirely outside the formal energy market. The association has warned repeatedly that energy costs have become the single largest threat to the survival of domestic industry, overtaking even currency depreciation and import restrictions on its list of concerns.
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Small and medium enterprises, which form the backbone of Nigerian employment, are feeling the strain most acutely. Unlike larger corporations that can negotiate long-term fuel supply agreements or invest in solar infrastructure, small business owners largely buy fuel at retail prices, absorbing every market fluctuation directly.
A barbershop in Abuja, a printing press in Port Harcourt, a restaurant in Enugu, all face the same brutal calculation each time they switch on a generator.
“I closed one of my two branches last year,” said Bello Musa, who operates a pharmacy chain in Ijora. “The fuel bill for running a generator in that branch was more than the rent. It stopped making sense.”
The government has acknowledged the pain. President Bola Tinubu’s administration has repeatedly promised to accelerate reforms in the power sector, including efforts to attract private capital, clear the long-running debts owed to electricity distribution companies, and expand gas supply to power plants that sit idle for lack of feedstock.
Officials argue that the subsidy removal, however disruptive, was necessary to stabilize public finances and redirect spending toward infrastructure.
Analysts are less sanguine about the near-term outlook. “The structural problems in the Nigerian power sector have existed for decades and they will take years to meaningfully resolve,” said Amaka Obi, a Lagos-based energy economist. “In the meantime, businesses are being asked to absorb a double burden: higher fuel costs on the open market and continued unreliability of the grid. That is an extraordinarily difficult environment in which to survive, let alone grow.”
Solar adoption is rising, micro-solar installations have become more common among small retailers and residential customers, but the capital costs remain prohibitive for the majority of small business owners who are already operating on thin margins. Financing options remain limited, and the naira’s depreciation has made imported solar components significantly more expensive in local currency terms.
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Back in Lagos, Adeyemi has begun exploring whether he can install a small solar-plus-battery system to reduce his diesel dependency. The upfront cost, several million naira, is daunting, but he has started saving. In the meantime, he has raised his delivery fees twice in the past year and lost two clients who said the increases made his service uncompetitive.
“Nigeria is a country where the private sector has always been expected to solve its own problems,” he said. “But even we have limits. We can be creative, we can adapt — but we cannot print diesel.”