In the wake of the economic downturn, as the conglomerates are grappling with challenges of survival, many small businesses are on the verge of going under.
SMEs challenges range from absence of power, coupled with increased tariff to lack of foreign exchange, especially for those that rely heavily on import.
Chief Executive Officer at West Africa Vocational Education (WAVE), Misan Rewane, said unemployment has increased, while jobs have become fewer. “We help West African Youths with relevant skills to access employment opportunities in retail hospitality. So, when economic downturn like this happens, we get more clients because companies lay off workers, there are salary cuts and unemployment increases. But as much as our clients have increased, the jobs to give them are not there because companies are not employing. Inflation has increased, but the salaries and wages are yet to increase, everyone is going through tough time economically,” she explains.
She is, however, of the opinion that though big conglomerates are negatively affected, small businesses should buckle up to face the uncertainties of the second half of the year.
“Just as the big businesses are finding it hard to source forex, so also small businesses are facing the same challenges. Some of our expenses are in dollars, and we don’t have a choice. I tried getting some computers for a client, but I couldn’t pay with my Master Card, which made things difficult. People who planned to start businesses this year have kept it on hold, as this isn’t even a good year for expansion. So, a lot of businesses are facing uncertainty. They are considering whether to move forward with their plans or hold on. People are also not being rational with prices of items. Small businesses need to buckle up because of the uncertainty in the second half of the year.”
The President, Bead Jewellery Designers Association of Nigeria (BJDAN) Mrs. Betty Adepoju also believes small businesses are desperately battling to survive.
“Small businesses already have issues ranging from lack of funding to unstable power and high tariff. When you add the fallen oil price and government’s control of the Dollar, if care is not taken, small businesses like ours will close, and we know that development begins at the grassroots. Small businesses need to grow, but even government is finding it hard to pay salaries. So, funding small businesses right now will be a struggle.”
The President, Association of Small Businesses Owners of Nigeria (ASBON) Dr. Femi Egbesola said, “we are in a very difficult period where businesses are either ailing or dead. Initially, we used to complain about lack of access to funding, absence of power supply, but now power is worse, Dollar has fallen, there is inflation, and even the signing of budget is also a factor, now that it has been signed, we hope to experience some relief.
“Our members are complaining incessantly about their predicament, and as a result, we have written to the president. People say SMEs are the engine room of a nation, but it appears we are just paying lip service. People who took small loans cannot payback, some of our members have closed shops, N10 in the hands of a trader has been devalued to as low as four Naira. With all these indicators, still we cannot advise people not to do business, but the truth is that now is a bad time to start a business.
“Personally, most of our raw materials are imported, and the prices have increased by about 60 percent, yet we cannot increase the price of our products. We have laid off some workers, reduced operations, reduced our reliance on petrol and increased our reliance on diesel for our trucks because petrol has become expensive, “ that is the reality we are facing now.”
The Director General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf says SME operators would need to adopt a survival strategy by going into other business lines that are more comparative in nature.
“The effect is profound on import dependent producers of goods and services. They now need more money to do business because of foreign exchange they don’t get, which is eventually got at an expensive rate not profitable for business. As things are now, sales have dropped. What SMEs can do now is to switch to business lines that demand higher local content.”
In his view, the economic crisis demands that small enterprises make spending adjustments.“This is a call to cut down on spending, as well as adjust a lot of things to stay afloat. Power is also a major contributor to the challenges SMEs are facing, which if stable, might not solve the problem, but will definitely create stability. Fuel scarcity is also an issue. Eventually, businesses buy from black market just to be able to produce at an expensive rate that is unprofitable for business. The budget is also delayed; those who supply government agencies would also be affected. The budget needs to be signed so that the cash flow in the economy can improve a bit. Government also needs to adopt a flexible forex strategy,” he explained.