Industry experts have expressed significant concerns regarding the prospects for small businesses in Nigeria as they brace for a challenging fourth quarter in 2024. Key figures from the Association of Small Business Owners of Nigeria (ASBON) and the Nigerian Association of Small Scale Industrialists (NASSI) conveyed their worries in recent discussions, highlighting several ongoing issues affecting the sector. Dr. Femi Egbesola, President of ASBON, characterized the upcoming quarter as potentially the “worst time” small businesses have faced in recent memory. Various challenges, including currency devaluation, fuel subsidy removal, rising taxes, and unreliable power supply, have created an environment where most small businesses do not anticipate any significant relief or improvement in the foreseeable future.
Egbesola emphasized the bleak situation by noting that many businesses have already been forced to close, with estimates suggesting that 10-15 percent may shut down entirely. The economic landscape has led some business owners to seek alternative employment or even relocate abroad in pursuit of better opportunities. Adding to the frustration of small business owners is the sluggish implementation of government interventions designed to support the sector, such as the long-promised zero VAT for small businesses and zero-duty tariffs on select food items. Egbesola has voiced disappointment over the government’s inefficiencies in executing these initiatives, suggesting that rather than easing the burden on businesses, costs continue to escalate, exacerbated by high borrowing costs attributed to a steep monetary policy rate of 27.25 percent.
The challenge of accessing affordable credit is a critical concern for small businesses, as soaring interest rates hinder their ability to secure the necessary funding for growth and operations. Egbesola lamented, “It is not sustainable now to go to the bank to borrow money at that kind of interest rate,” noting that inflation has further diminished the purchasing power of existing capital, leaving many small enterprises struggling to obtain raw materials essential for production. He also criticized the government’s small loan initiatives, like the disbursal of N5 million among SMEs, as ineffective, with many receiving only a mere N50,000. Egbesola questioned the impact of such small amounts and the fairness of distribution, thus emphasizing a need for a more substantial and equitable approach to financial support.
Despite the grim outlook, Egbesola acknowledged that some small businesses are finding ways to adapt and innovate. An emerging trend is the focus on exporting goods to larger markets and leveraging technology for better sales opportunities. He remains hopeful that 2025 may usher in improvements, particularly if inflation stabilizes and investor confidence in Nigeria rebuilds. “We are optimistic that things can’t go this way. Things must improve,” he asserted, highlighting a glimmer of hope amid the difficulties faced by the sector.
Segun Kuti-George, the National Vice President of NASSI, echoed these sentiments, indicating that many businesses would face a survival challenge unless significant policy changes or financial interventions are implemented. He expressed dissatisfaction with the government’s approach to policy reforms, especially the controversial oil subsidy removals, which he critiqued as misleading. His concerns reflect how these changes have contributed to skyrocketing costs for raw materials and operational inputs, undermining the competitiveness of locally manufactured products and ultimately reducing both turnover and profitability.
While Kuti-George recognized government measures like eliminating taxes for businesses earning less than N25 million, he labeled this threshold as outdated and needing an update. He argued that the actual value of N25 million has declined significantly, rendering it ineffective for the current economic climate. Furthermore, both Egbesola and Kuti-George underlined the insufficiency of government funding for small businesses, calling for enhancements in the management and distribution processes. Kuti-George particularly appreciated recent partnerships, like the Memorandum of Understanding with the Bank of Industry aimed at facilitating N75,000 loans to vulnerable members. Yet, he stressed the importance of involving business membership organizations, such as NASSI, in financial initiatives to ensure proper oversight and equitable access to funds, thereby highlighting the need for improved collaboration between the government and the business sector to yield effective solutions.
