Airtel’s Diesel Challenge: A Reflection Of Nigeria’s Harsh Business Environment

BY ISAAC ASABOR*

Airtel Nigeria, one of the largest telecommunications companies in the country, recently raised the alarm about the rising cost of diesel and its adverse impact on business operations. In a market where diesel plays a critical role in running generators due to high cost and unreliable electricity supply, Airtel’s plight is not an isolated case. It sheds light on the broader challenges businesses face across Nigeria’s economic landscape, a reflection of a business environment plagued by infrastructure deficiencies, inflation, and policy inconsistencies.

Nigeria, Africa’s largest economy, is paradoxically crippled by an unreliable power supply, forcing businesses to rely on diesel-powered generators for day-to-day operations. Airtel, like many other companies, spends a significant chunk of its budget on fuel. With diesel prices skyrocketing due to the combined effect of global energy market fluctuations and Nigeria’s removal of fuel subsidies, the cost of keeping operations afloat has become unsustainable for many.

In Airtel’s case, maintaining telecommunication masts, servers, and data centers, which are crucial for the uninterrupted service that millions of Nigerians rely on, has become a herculean task. The company has to bear these costs alongside other factors like inflation, currency devaluation, and fluctuating exchange rates, all of which have had a destabilising effect on businesses operating within the country.

Airtel’s diesel challenge is just a microcosm of the broader challenges that define Nigeria’s business landscape. Over the years, businesses, whether small, medium, or large, have had to deal with the realities of erratic power supply, crumbling infrastructure, and a regulatory framework that is often inconsistent or stifling. The uncertainty in the regulatory space adds to the risk factor, discouraging both local and foreign investments.

Power is a lifeblood for businesses, yet Nigeria has failed to reform its power sector effectively. The reliance on diesel as an alternative to the unstable national grid drives up operating costs across sectors, further exacerbating the struggle for survival. For businesses like Airtel, which depend heavily on consistent power to provide telecommunications services, the situation is not just inconvenient, it is an existential threat.

While larger corporations like Airtel may have the financial strength to weather the storm, albeit at a cost, smaller businesses are often left with fewer options. Small and medium enterprises (SMEs), which form the backbone of the Nigerian economy, are particularly vulnerable to the rising cost of diesel and other operational hurdles. Many SMEs have been forced to either scale back operations, raise prices (thereby passing the burden onto consumers), or shut down entirely.

Other industries such as manufacturing, healthcare, and logistics have also been severely impacted. Manufacturers, who rely on machinery and processes that require constant power, are faced with the dual challenge of diesel costs and an unsteady supply chain caused by inflation and import restrictions. Healthcare providers, particularly hospitals and clinics, face a life-or-death situation when they cannot afford to power essential equipment like ventilators and incubators due to high diesel costs.

Airtel’s predicament also highlights the ripple effects of government policies. The removal of fuel subsidies, while hailed as a necessary reform, has left businesses grappling with increased fuel costs. Furthermore, inflation is at a record high, driven by a weakened naira and disruptions in the global oil market. This inflationary pressure makes diesel more expensive for businesses, which in turn affects the cost of goods and services, squeezing consumers who are already struggling under economic hardship.

The devaluation of the naira also means that the cost of importing essential items, such as diesel, generators, and other machinery, has skyrocketed. Many businesses find themselves in a vicious cycle of increasing operational costs, which they can only partly pass on to consumers, while still trying to remain competitive in a market where purchasing power has been significantly eroded.

The Airtel diesel challenge should serve as a wake-up call for the Nigerian government and policymakers. Without drastic reforms in the power sector and improvements in infrastructure, businesses will continue to face operational hurdles that stifle growth and limit their contribution to economic development.

One potential solution lies in the renewable energy space. With the global shift towards greener energy alternatives, Nigeria could benefit from exploring solar power, wind energy, and other renewable sources. Airtel and other large companies could lead the charge by investing in sustainable energy, reducing their reliance on diesel, and in turn driving a broader shift within the business community.

However, without supportive government policies and incentives to encourage this shift, businesses will remain tethered to costly, unsustainable power solutions. The federal and state governments need to create an enabling environment for businesses to thrive by addressing infrastructure gaps, stabilizing the exchange rate, and crafting policies that are consistent and supportive of business growth.

Airtel’s diesel challenge is a symptom of the larger economic difficulties facing businesses in Nigeria today. With rising operational costs, inconsistent government policies, and inadequate infrastructure, the business environment in the country remains a challenging one. Companies like Airtel, with the resources to adapt, will survive but at a cost. For smaller businesses, however, the future is less certain.

If Nigeria is to unlock its economic potential, the government must address the fundamental issues that continue to stifle the business environment, including the power crisis, inflation, and regulatory challenges. Otherwise, the country’s business climate will remain one of survival, rather than growth and prosperity.