SMEs catch cold as Nigerian economy sneezes

At the boisterous Computer Village in Lagos last Wednesday a phone retailer Samuel Adindu sat on a stool watching as people passed.

It was 2 pm and the scorching heat of the sun was hitting him like a sledgehammer.

He had opened his shop at 7 am, but spent the next four hours playing chess.

At 1 pm Adindu had grown tired of chess. He was also, expectedly, hungry. He did not have a breakfast at home as he had hoped that a certain ‘Good Samaritan’ would buy at least a phone charger for N300 to N500 one hour after he had opened his shop. At least this would be enough for breakfast.

But he was wrong. Seven hours on, nobody noticed his prominently sited shop, packed with phones and their accessories.

Across the road were Adindu’s co-players who had left chess to look for customers. They would playfully tug the dress of women passers-by in a bid to lure them into buying.

The ladies would hurl abuses on them. Strong ones would hit the mischievous male traders lightly or throw their fists into the air to ward off the ‘troublers’.

Adindu stood, watching and smiling weakly, on an empty stomach.

“We are stranded here,” Adindu told Start-Up Digest, while narrating his experience.

“It is bad enough that you come to your shop but will not find anyone to buy.”

“I have a lot of mouths to feed. Will I tell them stories when I get home? Do five-year-olds understand that nobody bought anything from you?” he asked.

“Everyone tells me there is no money in the country now. People want to buy, but how will they spend when many of them are owed salaries arrears for months. People buy from here and sell in other states, so if governments and even private companies are not paying them salaries, how will they buy?” he asked.

Nigeria, Africa’s largest economy, is tottering towards recession as the country saw a negative growth in the first quarter of 2016, according to the country’s statistics bureau.

 

More than 27 state governors in Nigeria today cannot meet basic obligations to their citizens, particularly civil servants, owing to over 50 percent drop in oil revenue, occasioned by crash in oil prices. Oil revenue provides 90 to 95 percent of foreign exchange and 75 percent of revenue for Nigeria.

Private companies are currently squeezed by unfriendly policies, which have made a number of them owe workers’ salaries for months. Hundreds of thousands of jobs have been shed by these businesses in the last 10 months.

“A lot of them that have sacked in the last eight to 12 months are SMEs,” said Ike Ibeabuchi, managing director of Abuja-based MD Services Limited, a small-scale chemicals maker.

“This is understandable, as up to 90 percent of businesses here are SMEs. Again, these businesses are often the worst hit in a situation like this,” Ibeabuchi said.

 

Apart from lack of policy direction by the current government, the economy has faced the biggest foreign exchange crisis (FX) in its history.

The Federal Government had spent several months gambling on the FX regime to adopt.

According to Kaduna Chamber of Commerce, Industry, Mines and Agriculture (KADCCIMA), the Organised Private Sector (OPS), mainly micro, small and medium enterprises, lost N1.46 trillion between July and December 2015, while the leadership of the country dithered on FX policy.

 

“To avoid the risk of industrial closures, such foreign exchange policy needs to be avoided,” Abdul-Alimi Bello, president, Kaduna Chamber of Commerce, Industry, Mines and Agriculture (KADCCIMA), said at the heat of the crisis in February, 2016.

The increase in the price of fuel has also raised SMEs operations cost. Unfortunately it is difficult for the operators of small businesses to transfer all or some of the burdens to consumers, whose purchasing power has dropped considerably.

Ola Rotimi, operator of a fast-food joint in Port Harcourt, told Start-Up Digest recently that he tried to raise the cost of a plate of food from N500 to N700 but was disappointed when his customers stopped coming.

“They suddenly disappeared,” Rotimi bellowed.

“I had to lower my prices and then paste a notice on the wall before they returned. But that was after I had gone out to look for them. I use fuel regularly and need to raise my prices to reflect the situation, but this has hit a brick wall,” he said.

For Greatsheyi Akintunde, chairman of Nigerian Association of Small Scale Industries (NASSI), Ondo State chapter, this is generally bad news for small businesses, especially those in the productive sector. Akintunde said many scale-scale industries could shed jobs and may not survive the increasingly harsh business environment.

 

ODINAKA ANUDU