SME sector leaders appraise challenges in recession.
At the backdrop of the lingering economic headwinds, leaders of the organized have given an impact assessment of the situation on the sector. Aside recession induced business failures or suspension of operations the worry is now about when the adversity will bottom-out. Chairman, Nigerian Association of Small Scale Industrialists, Lagos State, Mr S.T. Kuti-George, told SME Vanguard, that the situation doesn’t point in the direction of survival because, rather than things getting better, it is getting worse. George said, ‘‘cost of procuring raw materials and other inputs for operation in the sector increased by over 100% and this has distabilised our businesses in the SME sector. Can I pass 150% cost of production to buyers and consumers?.
How can we cope in this recession where there is increase in power tariff without steady power supply. This is another issue killing our business here.’’ According to him, the country is not building infrastructure to encourage business growth in Nigeria. On the issue of Lagos state granting tax rebate to SMEs George further said, “it’s news to me but if that’s true, it is step in the right direction. As a matter of fact, it’s part of what we have been clamouring for, a good relief and a well thought-out decision. ‘‘I commend the government of Mr. Akinwunmi Ambode for this and other innovative ideas he has brought to the business space in Lagos State, some of which are the establishment of the Ministry of Wealth Creation and employment and the ongoing Lagos State Employment Trust Fund (LSETF). •SME operator at work “ My advise to him, he doesn’t relent but continue to push ahead to tackle more challenges. For example, the establishment of more clusters (SME business clusters) which, I believe, is a sin-qua-non for our industrial development.’’ Lamenting the adverse operating environment, the Executive Secretary, Nigerian Association of Small & Medium Enterprises, Eke U. Ubiji, said, “No doubt it’s not easy for MSMEs (Micro, Small and Medium Enterprises) to survive where the CBN will be borrowing funds to Deposit Money Banks at 14% interest rate. With that it then implies that SMEs, other borrowers will be borrowing at even a more higher interest rate which will not augur well for SMEs and other stakeholders in the economy. ‘‘The National Bureau of Statistics(NBS) has already said it that for the third quarter that Nigeria is in recession & our GDP is not growing.
SMEs are not going to have it easy.’’ In the same vein, Principal Consultant, Lonadek/Project Consultant, Vision 2020 Youth Empowerment Restoration Initiative and Vision of the Cedar STEM and Entrepreneurship Hub, Ibilola Amaeo said, for SMEs to operate at its peak in the country, Government must invest in infrastructure, power and energy. She stated: “As soon as we have power, more SMEs would evolve and survive. Most SMEs fail today because profit goes to fund power supply, so SME owners end up working for diesel and generator sellers. ‘‘At this period of recession if the power and infrastructure equation is solved, we would create more jobs and wealth for youths when we start processing our natural resources and raw materials into finished products, preserve more perishables and reduce wastage”. Amaeo agreed that once infrastructure equation is solved, bulk produce would be easily moved out of the hinterland to the cities where they are much required. “Reverse migration would happen because the infrastructure to commute is better. If power and broad band is available in remote parts we would see industrial, trade and knowledge parks developing outside the congested cities where greater quality of life and comfort is available”, she said. Chief Operating Officer, 7interactive Limited, Taiwo Agboola, advised that the success of SMEs in any given environment depends on government economic policies. He stated: ‘‘We have clients outside the country, it has been a huge challenge meeting financial obligations in dollars.
The CBN Foreign exchange policy has had a huge negative impact on some of our business transactions. We have had to wait for weeks/ months to get Foreign exchange to settle some obligations. ‘‘Those are some of the issues facing business operations in Nigeria. Whenever government pronounced a policy, it has either positive or adverse effects on businesses in the country and this is one of the challenges of SMEs in Nigeria today. ‘‘Again, if government is planning a tax rebate for SMEs and it is carried out, it will go along way developing SMEs in the country. Tax rebate will help them have more money to put into their businesses. It would reduce some stress in their operation. Before now, SMEs are weighed down because of multiple taxation, but if this decision is implemented, it’s a win, win for all. Co-Founder/CEO, Nevelpotter Y& R, Dr. Celey Okogun, said, “it ‘s not really that something has not been done to SME sector, but why they are weak in operation is that Government has not handled the total value chain needed in that sector. Yes, the approach has been there, government raise everybody’s hope but at the end of the day government doesn’t reach to the logical conclusion.’’
According to him, ‘‘there is a whole value chain that is around SMEs as the case may be. But government fixes one portion of the chain and assume it will affect others and that becomes a problem. “For many years, we have been talking about financing, access to credit scheme and somewhere along the line government started arguing about poor management, saying can we start teaching about book keeping.’’