As Nigeria’s recession continues, experts and business owners are desirous of seeing micro, small and medium enterprises pull the economy out of the slump.
They add that if certain steps are taken, 37 million SMEs can make more than 47 percent to the gross domestic product (GDP), creating jobs when large enterprises are sacking.
Nigeria’s small businesses currently contribute 47 percent to the GDP, but are currently beset by a number of challenges that have pulled them back.
Already 222 of them have shut down in the last one year due to monetary policy issues and instability in the economy.
“You need a consistent monetary policy to stimulate businesses,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI). Yusuf told Start-Up Digest that the environment must be convivial for SMEs to thrive, adding that the country must revise its energy policy to make fuel, diesel and gas available for businesses.
He said SMEs should be able to access credit at a single-digit rate if the country is indeed serious with the sector.
The CBN recently raised MPR, which is the benchmark for the interest rate in the country, from 12 to 14 percent. Usually, banks respond to MPR changes, according to experts. With excessively high rates at deposit money bank, experts say SMEs could suffer unless the Bank of Industry is rcapitalised or more development banks established. Banks charge rates ranging between 20 and 35 percent.
“I don’t see how SMEs will not close down with this kind of interest rate we have today,” said Jon Kachikwu, chairman of SME Group at the Lagos Chamber of Commerce and Industry.
Kachikwu said at a period China is charging between one and two percent rate, Nigeria is charging well above 20 percent, adding that even Britain charges about one percent, despite that its inflation rate is over five percent.
Frank Jacobs, president, Manufacturers Association of Nigeria (MAN), said at a recent press briefing that what is needed at the moment is single-digit rate to steer the economy once again.
“What we need is an interest rate of five percent. We also want the recapitalisation of the Bank of Industry as this will enable the financial institution to do more,” Jacobs said.
Manufacturers claimed in a recent NOI Polls that the economy lost 180,000 jobs from the closures that took place in the last twelve months. One key issue pointed out by experts is the use of monetary policy to spike SMEs.
“The policy makers need to ensure that there is FX available for businesses in the short run. Fixing the FX is a quick win that can revive some of these companies,” said Vincent Nwani, director of research and advocacy, LCCI.
“In the long run, Nigeria needs to enact policies that will attract FDI inflows into the country,” Nwani said.
Friday Opara, director-strategic partnership, Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), said: “The FX issues have made the Nigerian business environment tougher. We need to look at our funding position for SMEs because businesses cannot access cheap funds, and this is why the government should fast track central bank movable asset collateral initiative.”
“The government needs to provide enabling environment so that business can survive,” Opara said.
Entrepreneurs and small business owners cannot easily access finance to expand business and they are usually faced with problems of collaterals, high interest rates, extra bank charges, inability to evaluate financial proposals and limited financial knowledge, among others, analysts say.
The cost of doing business for SMEs and business in general has continued to increase with the rise in interest rates and increased bureaucracy caused by new currency restrictions. In addition, increase in the prices of many commodity goods has spiked inflation in recent times. Taxes are mounting while insecurity is high in many areas.
“We need to ensure that businesses are protected. State governments are now seeing businesses as cash cows due to the level of money they get from the Federal Government, but this should not be so. Our ports also need to improve to facilitate business. It’s tough,”said Ike Ibeabuchi, CEO of MD Services Limited, producer of chemicals.