A recent report by Sustainable Energy for All (SEforALL) has painted a sobering picture of the energy challenges facing micro, small, and medium enterprises (MSMEs) in Lagos State, as they continue to bear the brunt of rising fuel costs.
According to the report, MSMEs in Lagos spend a staggering N5.3 trillion annually on petrol and diesel to power their businesses, primarily through generators, as they struggle with unreliable electricity supply.
The report, produced in collaboration with the Lagos State Government, highlights how this dependence on fossil fuels is stifling economic growth and development. It found that MSMEs in Lagos alone consume 6.6 billion liters of petrol each year, contributing 17.8 million tons of carbon emissions into the environment.
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With fuel prices on the rise and the cost of generator maintenance becoming increasingly unsustainable, MSMEs are facing a substantial financial burden, cutting into profits and hindering their growth potential.
Fuel Subsidy Removal, A New Reality for MSMEs
The report further revealed that 79% of industries surveyed have had to reduce their operating hours due to the removal of the federal government’s fuel subsidy. This development, though part of Nigeria’s broader energy reforms, has added pressure on small businesses, forcing them to scale back operations to manage spiraling fuel costs. The subsidy removal has significantly impacted the affordability of petrol and diesel, further complicating the already challenging business environment for MSMEs.
Renewables on the Horizon
However, there is a silver lining. The report reveals a growing awareness of alternative energy sources, particularly solar energy, among Lagos-based businesses. A remarkable 80% of businesses acknowledge the potential benefits of solar power. However, there is still a considerable gap between awareness and actual adoption. While businesses recognize solar as a viable alternative, only 52% of MSMEs are currently open to exploring it.
This lag in adoption is underscored by the fact that just 3% of businesses have made the full transition to using solar energy as their primary power source. This suggests that despite the awareness of solar power’s benefits, several barriers—such as high upfront costs, lack of financing, and inadequate knowledge—prevent a broader transition.
On a more optimistic note, the report indicates that 64% of businesses are showing interest in considering solar power as an alternative to traditional petrol and diesel generators. This growing interest suggests that with the right policies and support systems in place, solar energy adoption could significantly increase in the coming years. Businesses are becoming more open to investing in renewable energy sources, as the long-term savings and environmental benefits outweigh the initial costs.
For Lagos State, the potential for wider adoption of solar energy represents a critical opportunity to reduce its reliance on fossil fuels, cut down on emissions, and support the growth of its vibrant MSME sector. The state government has already made steps toward advancing energy transition efforts. Still, industry experts note that more needs to be done to accelerate the shift from fuel-powered generators to more sustainable alternatives.
Barriers to Solar Adoption
While the interest in renewable energy is growing, several obstacles are preventing wider uptake. High installation costs for solar panels, limited access to affordable financing, and a lack of technical knowledge about solar systems are key factors that deter many MSMEs from transitioning to solar energy.
The report suggests that government incentives, subsidized financing options, and awareness campaigns could help bridge this gap. By reducing the financial barriers to solar adoption and educating business owners on the long-term benefits, MSMEs may be more inclined to make the switch.
The government has been advised to focus on creating a more enabling environment for solar power through regulatory reforms that simplify the process of obtaining permits, as well as investing in public infrastructure that supports the growth of the solar energy market.
Solar as an alternative energy source, presents a unique opportunity to address both the economic and environmental challenges facing MSMEs in Nigeria. It is believed that if the barriers to solar adoption can be overcome, businesses could see a significant reduction in operational costs and, a stable power supply.