Worsening Consumption, Savings Cripple Nigerian SMEs, Manufacturing Firms

The rising level of inflation and monetary pressure that have put household income and businesses on knife-edge is taking its tolls on the balance sheets of Small Medium Scale Enterprises (SMEs) and micro manufacturing firms in the economy, LEADERSHIP learnt.

Amidst the undercurrent of food inflation and skyrocketing market prices, the Naira is becoming weak and losing its purchasing power such that, it is becoming challenging for households and small businesses to manage their bills with the operating cost among the factors of production.

The high operating cost of running business in the country has further worsened the general productive outlook in the manufacturing sector as micro, small and medium sized businesses struggle to reflate the economy.

RELATED

Mining Office Generates N6.95bn From Reforms, Digitisation In Q1

3 minutes ago

Fire Destroys 4 Shops, Building, Vehicle In Oyo

11 minutes ago

Public Market Analyst report from United Capital disclosed that, the surge in inflation continued to be driven by usual suspects, ranging from surging food prices, higher energy cost and consequent pass-thorough impact on prices of other commodities (for example via higher logistics cost).
In addition, it said, rising diesel prices (up 180.8% y/y) and impact on transportation costs (Airfares, Road Transport and Logistics) have supported the surge in core inflation.
The report reflects a pessimistic outlook on inflation for Nigeria, stating that, the elevated energy cost, food price price will keep inflation rate elevated and Given the foregoing, we project that inflation rate will continue to rise.
“We believe this holds significant concerns for monetary policy outlook. We see room for another 100bps hike in the MPR over the next two Monetary Policy Committee (MPC) meetings, as they try to balance moderate economic recovery with fighting inflation fires. Lastly, fixed income investors are admonished to trade with caution as we see significant interest rate volatility over the next months,” it stressed.
As the cost of living continues to rise beyond the means of many families in the country, Nigerians have appealed to the federal government to find a solution before the situation spirals out of control.
Reports from across the country showed the prices of food items, petrol, diesel and transport fares had gone up far above what they were few months ago.
Reacting, national president of Association of small business owners of Nigeria (ASBON) Dr. Femi Egbesola, decried over the rising cost of diesel in the country, adding that, this is making a lot of SME businesses groaning while reworking their operating hours to drive down cost and manage their bills.
According to him, inorder to survive the unfavorable business climate and the rising wave of inflation, the SMEs have turned to panic drivers to direct their businesses to recoup returns on investment, thereby, tightening the loopholes of financial leakages
Egbesola further said under this prevailing harsh economic conditions, the SMEs drivers are facing difficulty to either sell above cost price to enable them get more profits or face the risk of insolvency and closing of shops.
The chairman, Manufacturers Association of Nigeria (MAN), Apapa branch, Frank Onyebu, urged government to create policies and the enabling environment for value to be added to products before exporting.
He argued that the manufacturing industry is supposed to be the engine of the economy, but has so far failed to process because government has shown little concern.
Government, he said, is paying lip service to the issue of operating environment, lamenting that many potential investors abroad are interested in investing in this country but for the harsh environment.
“The country would have moved forward not just in value addition but in high technology but we are just sliding back.
It is a pity that we still export primary products without value addition. We all know that the value of any product appreciates with each value addition,” he added.
For value addition to make the required impact, Onyebu said, small and medium scale manufacturers would have to be involved.
“Funds and FX, which are not readily available, are needed to procure the required machinery. Government needs to create technical institutions and make the existing ones functional. Millions of jobs could be created with the right policies,” he suggested.
Chairman, SMEs Group, the Lagos Chamber of Commerce and Industry, (LCCI) Daniel Dickson-Okezie, said, though government has made efforts to improve the real sector through funding, more needs to be done.
He noted that corruption in the system was hindering those who actually need these funds from accessing them.
“Despite government’s statements on improving the real sector through funding, it’s not still enough. Corruption in the system has put a setback on the initiative. Most times those funds don’t get to the right persons. They end up in the hands of the wrong people,” he stressed.
The managing director, Goshen-Multi Nigeria Ltd and immediate past chairman of the National Association of Small Scale Industrialists (NASSI), Kuti George, stated that, loan facilities were not accessible. “The Central Bank of Nigeria (CBN) needs to make access to funding easy.
“The country needs to build industries, when the nation is industrialised, it will boost the economy. Government needs to encourage production and manufacturing by funding them. Most people have ideas but don’t have the funds to produce and increase value. MSMEs need access to cheap funds.
“The government says there are a lot of windows to access loans but these windows are not actually accessible. The loan facilities are not accessible. The CBN needs to facilitate easy access to loans,” he pointed out.
Speaking in interviews by LEADERSHIP, some residents of Oluwole Sunday Market in Ogba area of Lagos State, revealed that, life is getting unbearable for them, especially those with large families.
A trader at Obawole Market in Lagos, Mr Emmanuel Dike, said a bag of Semovita now sells for N6,500 against the N3,700 it was up until April while a carton of spaghetti now sells for N7,400 up from N5,800.
Also, he said, a bag of local rice which used to cost between N20,000 and N24,000 last year, is now N29,000.
A Lagos resident, Chinemerem Augustine, said the purchasing power of her family has gone down drastically owning to the situation.
A fast food outlet operator who identified himself simply as Boma Derikoma said, it is extremely difficult coping with the increasing prices of food items required for his business.
A civil servant in Delta State, Mrs Bridget Orie, told LEADERSHIP that her salary had been eroded by inflation.
She said: “12.5 kg of cooking gas which cost N4,700 early last year is now N10,000. Inflation has affected just everything in the market including transportation. You saw that petrol marketers just jerked up price of PMS to N180 without any move from the government.
“Now imagine the impact of these rising prices on my salary. Government needs to increase salaries in order to cushion its effect on workers.”
Another resident, Alhaja Modinat Orelope, said: “See, a loaf of bread which I used to buy for N400 last year is now N800. We can’t do without bread. It’s a staple food that we can’t do without. Out children can stay without eating bread, sadly, the rising cost of flour has made a lot of bakers to increase their price.
“Prices of beverages have soared by about 80 per cent. A 25 litre of palm oil which used to cost N15,000 last year is now N28,000.”
A property developer, Mr Wale Babatunde said: “rent has gone up in the last one year. On the average, a flat that used to go for N250,000 in medium profile areas now goes for N350,000 to N400,000.
To him, “that’s the average increase that we have witnessed in the last one year. Tenants are complaining. Some are having problem renewing their rent as and when due but what can we do?”
A QSR operator, Sabina Uwadiae said the situation had badly affected her business, adding that, the price of vegetable oil is always on the increase, saying, ‘I used to buy a litre of vegetable oil for N800 six months ago but now it is N1000.’
A retired civil servant in Lagos, Mrs. Funke Egbetokun lamented that the situation has affected most families.
She said: “I used to spend N30,000 every month to buy foodstuffs. Things started going wrong at the turn of the year when in March, I went to the market and returned with a few things.”
A resident of Ifo Community in Ogun State, Mr. Wole Odeyemi said he was embarrassed at the daily increase in prices of cooking gas.
He said: “within the last six months alone, I have witnessed steady rise in the prices of these items.
“Kerosene has risen so high that the poor can no longer buy it. Everyone has resorted to cooking with wood and charcoal because kerosene has gone beyond the reach of poor people.”