Businesses and commuters within Lagos Metropolis have expressed dissatisfaction over the worsening level of hardship in the country which has grounded businesses and disposable income to a halt.
Experts fingered SMEs as the main victim of this development as they grapples with several challenges such as; high cost of living, high energy cost, inflationary pressures, improper documentation, lack of business models, advisory support, improper documentation, lack of financial audits from banks, multiplicity and regressive tax system among others.
According to experts, FX volatility is another factor that has continued to limit the progress of Micro, Small and Medium Enterprises (MSMEs) as many are importers of either finished products or inputs.
Obviously, many Micro, Small and Medium Enterprises in Nigeria were already facing existential threats from a struggling economy but have plummeted with the ripple effects of the new Naira redesign policy and cash crunch crisis of the Central Bank of Nigeria (CBN).
In recent times, over 41.4 million MSMEs are struggling financially to survive the headwinds of inflation, surging food price and dwindling income which have forced many households to cushion their shopping and spending habits.
Succinctly, the unbanked MSMEs in Nigeria did not foresee the current economic trends of cash crunch crisis and the new Naira redesign policy of the CBN which therefore has largely put business models and plummeted the unbanked SMEs into a state of job loss, debt overhang, among others.
Confirming this to LEADERSHIP, National president, Association of small business owners of Nigeria (ASBON) Dr. Femi Egbesola advised that, adequate measures was needed to tackle the cash crunch disruptive economy, noting that, the effect of the cash swap policy is largely unprecedented, far reaching and was a two fold exercise to erode the working capital of the nano and micro sector operators in the country.
ASBON boss, however, listed the two fold effects of the cash redesigned policy on the SMEs sector while asserting that the micro, small and medium enterprise, informal sector operators, rural areas and the unbanked communities that have not embraced digital banking and financial inclusion were the worst hit of the cash swap and redesigned policy.
He said: “on one hand, nano and micro businesses in rural and hinterland areas that largely dependant on cash for virtually all transactions are largely affected by the cash crunch.”
According to him, this category of businesses are not used to digital and online e-commerce banking transactions, hence, quite a number of them just couldn’t transact their normal day-to-day business activities. “There’s no cash anywhere. Even to pay transporters to move their farm goods and products from the farm to the town becomes a great challenge as transporters need to be paid in cash.
“The resultant effect of this is that many of these perishable goods are sold at give away prices. This indeed is a big loss for businesses in such sectors,” he stressed.
He asserted that the PoS operators that serve as a bridge or banking agents are also catching in on the gap and exploiting the micro businesses that have no other option than to patronise them.
He said, quite a number of these POS operators charge as high as 10% which is even far higher and above the imaginable profit on the businesses their clients undertake.
“This, no doubt, ends up eroding the meager working capital of these nano and micro sector operators.
“On the other hand, the cash crunch has hitherto brought to fore the awareness and need for the nano, micro and small businesses who are yet unbanked to now see reason to open bank accounts, embrace online and digital banking and be able to send and receive online cash transfers.
“In the long run, this will no doubt improve business operations, make business accounting much easier and reduce dependence on physical cash.
“As of today, we now have meat sellers, pepper sellers, vegetable sellers, artisans etc being ready and willing to collect bank transfers for the micro business transactions,” he pointed out.
On his part, the chief executive officer of Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf hinted that the MSMEs account for a large number of jobs and so, when they feel this kind of shock, it will get saturated into high unemployment numbers.
He averred that regulatory pressures, harsh operating environment, inclemency, and foreign exchange (FX) volatility forced over 1.9 million micro, small and medium enterprises (MSMEs) to exit the Nigerian business landscape between 2018 and 2020, while borrowing statistics from the National Bureau of Statistics and the Small and Medium Enterprises Development Agency of Nigeria.
CPPE Boss said the MSMEs are left to battle with various issues, ranging from poor power supply to restrictive economic policies, FX volatility and tax multiplicity.
Speaking further, Yusuf said the crisis generated by the currency swap could put the N100 trillion component of the national GDP at risk, noting that even the 10 day extension of the deadline for the swap is grossly inadequate.
According to him, the crippling of business transactions at the distributive trade end amid the currency swap crisis would not only undermine the trade and agricultural sectors but would have a knock-on effect on the manufacturing value chain and the services sectors.
Yusuf stated: “the crippling of business transactions at the distributive trade end amid the currency swap crisis would not only undermine the trade and agricultural sectors but would have a knock-on effect on the manufacturing value chain and the services sectors. This is because whatever is produced has to be sold.”
Also speaking, president and chairman of governing council of the Nigerian Association of Small and Medium Enterprises, (NASME), Abdulrashid Yarima said, the manufacturing world has not yet recovered from COVID-19. And the rising cost of inflation has caused an increase in the cost of input which will have a multiplier effect on the manufacturers’ cost of output.
Yarima added that the high cost of foreign exchange, customs duty, poor power supply, and insecurity have forced many MSMEs to shut down operations.
He said, the situation in the sector has worsened with the Russia-Ukraine war, adding that, the number of MSMEs has reduced to 31 million in 2023 from 39.6 million in 2020 even as the managers of the economy are not managing it well.
To him, “the Nigerian business environment is becoming increasingly tougher for small businesses as they struggle for survival. Poor power supply has continued to take a toll on Nigeria’s economic development, and its impact is more pronounced in the MSME sector. Another challenge is the duplication of functions among various regulatory agencies, which continues to affect the growth of SMEs.
“The complexity of the functions of regulatory agencies seriously affects the growth of SMEs as some laudable projects are being frustrated by regulators,” Yarima said.
We’ve got the edge. Get real-time reports, breaking scoops, and exclusive angles delivered straight to your phone. Don’t settle for stale news. Join LEADERSHIP NEWS on WhatsApp for 24/7 updates →
Join Our WhatsApp Channel
