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Operators in the Micro, Small and Medium Enterprises (MSMEs) are fuming over the harsh economic scenario in the country that is leading to the death of many Small and Medium Enterprises(SMEs) in recent times.
Price shocks, unavailability of raw material, exchange rate volatility and lack of awareness about mechanisms to manage unpredictable markets, the FX market volatility, among others, have crippled SMEs and nano businesses nationwide.
Confirming the development, the national president of the Association of Small Business Owners of Nigeria (ASBON), Femi Egbesola said, the untoward situation in the economy is killing SMEs and nano businesses nationwide, adding that reports of business scenarios were frightening and raising curiosity among players and operators in the business environment.
The ASBON boss decried that Nigerians are about to dump their businesses to look for white-collar and blue collar jobs to survive the harsh reality on ground, predicting that, if an urgent solution is not provided, prices of commodities would continue to go up,
According to him, “People will begin to dump their businesses to look for either white collar jobs or blue collar jobs or resort to menial jobs like okada riding, manual farming and the rest. It means that, it will increase joblessness because when those people stop their businesses, the one or three people that they employed will be back to the labour market and when you have more joblessness, you will have more crime because people must find ways to live.”
He averred that business environment was no longer promising and futuristic as more businesses have plunge into debts due to overhead cost of running businesses He alluded that a good number of businesses have closed their shops, particularly, those who depend solely on FX and market transactions while many operators have fallen into a large swoop due to the current predicament in the economy.
He said, entrepreneurs running businesses are retooling their business models, while others are closing shops and revamping operating space, noting that some firms have sacked their workers while some have closed shop completely. Statistics show that about 10 per cent of businesses have closed shop in the last one year.
“That is about eight million businesses. Ten per cent of the existing businesses captured by data is about eight million and that’s huge. So, that’s the challenge at the moment. We are also talking about looking at alternative sources of power but the micro and small businesses cannot afford it – talking about alternatives like solar energy, inverters, gas like CMG and the rest,” he said.
On the inflation side, he said: “inflation rate is now 28.92 per cent and that’s the highest in the history of the country and it is not going to stop; it will continue to go up because the dollar too is also going up.”
He noted that, the resultant effect of the development was that, there will be more joblessness, more businesses that will fold up, more people will continue leaving the country and the confidence of investors will be eroded completely.
“Talking about the figure of losses incurred, we do not have a research based report and it would be out of place to be talking without evidence. But we don’t need a soothsayer to tell us that the losses incurred by traders are very enormous.
“I want to say that when the federal government wanted to remove fuel subsidy, they should have made a proper plan in ensuring that electricity is stable because ordinarily the government should know that everyone would more or less come back to electricity immediately if the subsidy was removed,” he stressed.
The ASBON president noted that, if the government fails to enhance legitimate ways of earning income, Nigerians will look for alternative ways of doing so, which would most likely be illegal ways.
Commenting on the development, the director general, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, advised that the duty to determine and compute exchange rates should rest with the fiscal authorities (the Finance Ministry) while the CBN concentrates on other pressing matters.
“Businesses are yet to recover from the shocks of the new round of currency devaluation resulting from the sudden unification of the exchange rate which has driven the official exchange rate to about N1400.
“It is a double jeopardy for the investors across all sectors, especially those in the real sector. This action will further fuel inflation as production and operating costs escalate. The vulnerable segments of the population will be further impoverished as cost-push inflation gets exacerbated.
“CPPE appeals to the CBN to reverse this rate hike in the interest of the already impoverished segments of our society and the numerous businesses that are already on the verge of collapse. The shocks, disruptions and dislocations are of immense proportions. It is even worse that the rates take immediate effect. This is a policy action that is difficult to justify, especially in the context of the multi-dimensional headwinds that businesses are grappling with.
“The CPPE recommends that, going forward, the determination of the exchange rate for import duty computation should be treated as a fiscal policy matter and located within the remit of the fiscal authorities which is the Finance Ministry. This is necessary for proper alignment with extant fiscal policies”, he explained.
Also reacting, the director general of Manufacturers Association of Nigeria (MAN) Segun Ajayi-Kadir, in a telephone conversation ,urged the new governor of the Central Bank of Nigeria(CBN), Yemi Cardoso to prioritise addressing the upward inflationary trend that has echoed as a nightmare for manufacturers. MAN noted that the unfavourable situation has positioned the country among the worst countries to do business with a rank of 171 out of 190.
He said the manufacturing sector is presently grappling with unprecedented challenges including the sustained devaluation of naira, limited access to foreign exchange, a struggling economy and persistent inflation, alongside perennial problems of multiple taxation and epileptic power supply.
These challenges, the OPSN said, had resulted in a record crash in sales for most businesses running into billions of Naira, with the result that manufacturers are struggling to remain in business, amidst looming job cuts, mothballing of factories and total shutdown of businesses.
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