Forex Crisis Killing Small Businesses, Operators Cry Out

The national Association of small business owners in Nigeria (ASBON) has expressed concerns over the grappling volatility of Fx market and the attendant effects on Small and Medium Enterprises (SMEs), micro and nano businesses, a concern equally raised by Nigerian Association of Small-Scale Industrialists and indigenous entrepreneurs.

ASBON Boss, Dr. Femi Egbesola while speaking with LEADERSHIP attributed the collapse of the SMEs to a harsh business environment from high cost of operations, inflationary pressures, overhead cost, over-taxation, lack of access to funding, FX Market fluctuations among others.

Egbesola lamented that despite MSMEs immense contribution to the nation’s economy, there had been a lack of willingness on the part of the government to address these bottlenecks that continued to send small businesses out of business.

He said,: “The reason is obvious. The high cost of operations, lack of funding, poor infrastructure, multiple taxes while affirming the need for Lagos State Internal Revenue (LIRS) to build conversation around multiple taxes and how it is affecting the SMEs.’

ASBON’s MSMEs survey disclosed that at least two million SMEs in the country crashed between 2017 to 2021, adding that, the number of MSMEs dropped further from 39 million to 31.2 million SMEs.”

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Egbesola urged the government to move swiftly to address the harsh business environment faced by business as the palliatives would have little effect if the environment remains harsh.

He underscores that the current exchange rate crisis may force businesses to increase prices, potentially leading to economic challenges.

He added that: “96 per cent of those in businesses are in the nano and micro sector, and these are people who are informal and mostly illiterates. So, if the process is not done well, you may seclude this sector from benefitting from it.”

Egbesola urged the government to move swiftly to address the harsh business environment faced by business as the palliatives would have little effect if the environment remains harsh.

Commenting, Immediate past president of National Association of Small-scale Industrialist, Mr. Kuti George pointed out the impact of the unstable foreign exchange regime in Nigeria on small businesses and other issues and how it affects consumers resulting in business closures that ultimately impact the broader economy.

Kuti-George queries why the floating of the Naira has not effectively curbed speculative activities in the foreign exchange market.

He asserted that the rising cost of production, driven by a reliance on imported inputs like equipment and raw materials, is a significant factor contributing to this challenge. As input costs rise, so does the cost of production, potentially leading to higher product prices.

Kuti-George raised a critical question: Will consumers still be able to afford locally-produced goods? There’s a risk that imported products might become more attractive due to pricing disparities, potentially leading to a preference for imported goods over domestic ones.

Addressing the issue, he said the government needs to avert further factory closures, while urging the government to take swift action in stabilising the Naira’s value, particularly in the parallel market where many customers access foreign exchange.

In June 2023, the Central Bank of Nigeria (CBN) unified exchange rate windows to maintain Naira stability against foreign currencies, notably the United States Dollar.

Meanwhile, chief operating officer of Centre for the Promotion of Private Enterprises Dr. Muda Yusuf highlighted the high mortality rate among Nigerian MSMEs due to various challenges within the business environment.

These challenges,he said, 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 to address critical infrastructure concerns, with immediate attention to be directed towards electricity supply and logistics. He also advocates for 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.

Furthermore, Yusuf stressed the importance of tackling regulatory and institutional hurdles that affect MSMEs, particularly in accessing credit, managing the cost of credit, and determining fund tenure. Addressing these concerns will be pivotal in fostering a thriving MSME sector and catalysing economic growth.