Small Business Operators Say Rate Cut Alone Won’t Ease SME Burden

Small business operators have urged the federal government to look beyond the recent cut in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN), warning that the reduction alone will not meaningfully ease their operating costs or unlock credit without broader structural reforms.

Speaking under the aegis of the Association of Small Business Owners of Nigeria (ASBON), the operators called for broader economic reforms to complement the recent reduction in the Monetary Policy Rate (MPR), saying lower interest rates alone will not sufficiently ease the burden of doing business in Nigeria.

The association said the government must ensure that the reduction in the benchmark interest rate translates into cheaper and easier access to finance for small and medium-sized enterprises (SMEs) through commercial financial institutions.

In an interview with LEADERSHIP, the national president Association of Small Business Owners of Nigeria (ASBON) Dr Femi Egbesola, said the MPR reduction should ultimately translate into a broader improvement in the ease of doing business across the country.

According to him, SMEs are increasingly operating in international markets, making it imperative for Nigeria to reduce production costs and improve the competitiveness of its businesses.

“What will happen is that we are looking at it translating to ease of doing business all around, not just in relation to interest reduction alone,” he said.

Egbesola urged the government to go beyond reducing the policy rate and ensure that commercial institutions pass the benefits to businesses by improving access to lower-cost funds.

“Our next prayer is that the government should go beyond just lowering the interest rate to ensure that this is being entrenched by all commercial institutions, such that the SMEs are able to have more access to lower interest rate funds and at the same time ease the cost of doing business,” he said.

The ASBON chieftain also identified poor infrastructure, high energy costs, inadequate financing and logistics challenges as major factors sustaining high operating costs and inflationary pressures on businesses.

He said that improving the electricity supply and making energy more affordable would reduce production costs, while better logistics would help manufacturers move their products more efficiently.

“We have said it many times that the best way to tackle all of this is to improve ease of doing business,” he said.

He added that the government must fix infrastructure, particularly electricity, while improving access to finance and logistics for businesses.

According to him, reducing energy costs and developing alternative energy sources such as Compressed Natural Gas (CNG) would also help bring down production costs.

He, however, lamented the limited availability of CNG infrastructure, saying only a small number of Nigerians and businesses currently have access to CNG vehicles and gas.

“If all of these are put together and it reduces the cost of production, the cost of doing business, you see naturally that inflation will drive down,” he said.

He explained that lower inflation would improve consumers’ purchasing power and, in turn, enable manufacturers and other businesses to sell more and expand their operations.

The association also called for the liberalisation of the CNG sector to attract more private-sector investment and expand access to the fuel.

Dr Egbesola said the dominance of government-owned CNG facilities had limited the number of players in the sector, thereby contributing to scarcity and long queues at existing stations.

“Liberalise it to the point that it will be easy for investors to be able to come,” he said.

“Most of these CNG stations are being owned by the government, either the federal government or the state government. Very few private sector players are in these. And what that means is that as long as it is not liberalised, you have very few players in this space.”

He argued that greater private-sector participation would make CNG stations more widespread and accessible to Nigerians, just as petrol stations are widely distributed across the country.

“You need to have many more private sector players. And that’s when you can have it on every corner, like we have the normal petrol station that we do now,” he said.

The ASBON president further urged the government to consider initial incentives or subsidies to encourage investors into the CNG sector.

“Government must be intentional about liberalising that particular sector, encouraging private sector players to come, even if it means subsidising it for the start, so that it can bring in investors who want to put their money in that particular sector,” he said.

He maintained that a combination of cheaper finance, reliable electricity, affordable energy, efficient logistics and wider CNG access would do more to ease the pressure on SMEs than monetary policy measures alone