There has been palpable drop in sales of Small and Medium Enterprises(SMEs) and manufacturing companies due to uptick in consumer prices and retail inflation, LEADERSHIP learnt.
News learnt that the hike in prices of goods and services have made Nigerians either totally suspend consumption of certain goods and services or reduce the volume of what was needed.
This development has forced over 41 million Micro, Small and Medium Enterprises(MSMEs) and big corporations into the whims of economic vulnerability as they struggle to overcome institutional and regulatory hurdles of persistent high inflation, high energy cost, logistics cost, multiple taxes, high exchange rate and liquidity crisis in foreign exchange market.
Obviously, MSMEs have become vulnerable to the whims of regulatory hurdles and a completely knocked down economy fraught with persistent inflation which has forced SMEs, local firms and midsized businesses to record high inventory of unsold products.
SMEs, particularly, are struggling to make sales and profits due to price adjustments caused by the spike of commodities in various markets across the country and the impact of the exchange rate.
Some of the business owners have also expressed fears of being thrown out of business due to high inflationary pressure halting sales and depleting profits.
The traders blamed the poor turnout and low patronage on low purchasing power of the people and harsh economic effects. They also did not rule out the forex situation and insecurity scenarios which had slowed down many businesses and caused some others to close shop.
They attributed the poor sales to low turnout as a result of economic factors, naira depreciation and low purchasing power of the consumers.
Experts predict that cost of living crisis, hike in MPR, uptick in retail inflation, subsidy removal amongst other drawbacks impacted the closure of firms and midsized businesses.
Speaking about the economic trials for MSMEs, director and CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf asserted that the Micro, Small, and Medium Enterprises (MSMEs) sector holds the key to Nigeria’s economic resurgence, provided it operates in a conducive environment.
Yusuf stressed the need to tackle regulatory and institutional hurdles that affect MSMEs, particularly in accessing credit, managing the cost of credit, and determining fund tenure.
Addressing these concerns, he affirmed that the MSMEs have the potential to create over 20 million jobs while stressing that the sector’s growth has been hampered by insufficient attention from authorities. Yusuf acknowledged the challenging climate for businesses, particularly, MSMEs, and applauded those who have persevered despite the prevailing difficulties.
He emphasised that MSMEs are the backbone of the Nigerian economy, embodying the resilience the nation is renowned for, even in the face of significant challenges, citing the high mortality rate among Nigerian MSMEs due to various challenges within the business environment.
He said, these challenges range from structural issues like infrastructure deficits to currency exchange rate fluctuations, leading to liquidity crises in the foreign exchange market. In seeking solutions, Yusuf proposed addressing critical infrastructure concerns, with immediate attention to be directed towards electricity supply and logistics.
He also advocated resolving issues related to foreign exchange liquidity and currency depreciation. Additionally, he suggested tax exemptions for MSMEs with an annual turnover of N50 million and below, coupled with efforts to streamline and reduce the burden of multiple taxes and levies.
Commenting on the downward trends of business activities, National president of Association of Small Business Owners of Nigeria (ASBON) Dr. Femi Egbesola said, government policy and efforts should be geared towards prioritising and enhancing diversification of the non oil sector to boost industrial output, and stabilise oil production to mitigate the risks posed by global oil price volatility.
ASBON boss stated that, small and medium-sized enterprises were still vulnerable to the whims of the economy, which was a recurring source of worry, adding that, the trajectory growth of the economy was underpinned by the pivotal role played by the non-oil sector, and driven by the improved activities of financial institutions through the development of consumer-tailored financial services product.
He said the complexities of multiple regulations and the limited availability of local finance were impeding SMEs’ efforts to become self-sufficient in Nigeria.
According to Egbesola, Nigeria’s startup scene has indeed been growing rapidly in recent years, with a focus on achieving self-reliance and addressing local content needs and challenges.
He noted, however, that while there are many success stories and promising initiatives, there are also significant challenges such as access to funding, infrastructure limitations, and regulatory hurdles that startups in Nigeria often face.
Also speaking, director general of Manufacturers Association of Nigeria, (MAN), Segun Ajayi-Kadir said, the antidote to sustainable improvements in exchange rate is to encourage domestic production adding that under the import dependent economy, local production is struggling with the precarious economy of high excessive inflation.
He said: “We should also look forward to an atmosphere that creates incentives for domestic industries to be able to thrive and to help us overcome some of the binding constraints that have limited our productivity over a very long period.”
Speaking further on price uptick and food inflation, Ajayi-Kadir said, it is necessary for the government to implement a stopgap measure to address cost of production and accelerate dry season farming to tackle inflation and promote domestic agriculture production in the country.
On his part, president of Nigeria Association of Small and Medium Enterprises (NASME), Abdulrasheed Yerima said, the interest rate policy has further eroded investment and the ecosystem of new startups who are trying to start new business in MSMEs.
While urging the government to remove the binding constraints withholding the ease of doing business in the country, he advised SMEs to make preparations to rejig business modules or they may end up folding up due to the harsh operating business climate.
Similarly, the managing director, Goshen-Multi Nigeria Ltd and past president of National Association of Small Scale Industrialists (NASSI) Lagos Chapter, Kuti George said, SMEs feed the large industries with those small components and add value to agric products turning them into raw materials for big industries.
Kuti-George identified inability to acquire modern equipment to meet up with global standards of production as another challenge facing the MSMEs sector, while urging the government to assist SMEs with access to credits to boost local production.
