‘COVID-19, forex squeeze, others cripple 85,000 MSMEs’


Lack of foreign exchange (forex) and other challenges remain huge impediment to operations within the business community, which have consequently caused about 85,000 Micro Small and Medium Enterprises (MSMEs) in Nigeria  to close shop between 2020 and 2021.

Since the invasion of COVID -19 pandemic in the country, businesses across the spectrum, especially MSMEs  have faced a number of hitches coupled with the already weak economy, which has forced some out of business, while some either reduced the quantity of goods being bought, manufactured or are turning to cheaper markets to source goods or raw materials.

Reports have it that small businesses are the major bulk sector of the Nigerian economy which contribute 95 per cent to the total number of employment generation.

But for some time now,  the  bureaucratic bottlenecks, documentation processes,  timing to get forex from the banks and funding are beyond the reach of small business owners, because  the banks have not been duly standardised to the point of accommodating the documentation processes of small business owners

 Forex which is the back bone of international trade and a key determinant of some critical economic parameters  has been a thorn in the flesh which often challenged the Central Bank of Nigeria (CBN).

Apart from forex which is biting hard and restricting import, and export,  small businesses are being pummeled by the rising cost of energy, transportation,  devaluation of the local currency,

acquisition of land, poor infrastructure, the multiplicity of taxes and levies from different tiers of government, security  and inconsistent government policies.

Industry experts have  proposed the need to convert the nation’s huge resources into competitiveness, bridge its infrastructure gaps, particularly  improve the business environment,  harmonise monetary, fiscal, trade and industrial policies, eradicate multiple tax, reduce smuggling, substandard and counterfeiting of products and strengthen regulatory bodies. 

Stakeholders are of the view that these challenges needed a quick action as businesses cannot operate with these problems which have scared many entrepreneurs out of the country while many have shut down.

They lamented that there are quite a lot of low hanging fruits that needed to be taken away to allow the MSMEs sector to thrive. 

The stakeholders insisted that  government has to prioritise some sectors on the forex issue,  like the manufacturing and MSMEs sectors so that they  will keep producing or else unemployment will increase. To save the day and improve forex inflow, they suggested that  non oil export has to be encouraged now.

Noting that the restrictions on accessing forex has  worsened the state of MSMEs, to derive inflow of forex to cushion the impact, they suggested  that the government should encourage export in non oil sector by ensuring that Export Expansion Grant (EEG) is implemented to encourage export.

Though the CBN , through its stimulus package tried to intervene to cushion the effect of the pandemic on businesses,  many MSMEs still complained of not having access to the funds.

Government had  introduced a number of impressive initiatives in form of economic policies, schemes and projects aimed at encouraging businesses and consolidating prior achievements.

Among such initiatives in the year were specific stimulus packages such as N50 billion facility for SMEs and Households, N100 Billion for Healthcare and Pharmaceuticals, and N1Trillion for Manufacturing and Agricultural sectors and more.

This is expected to boost the performance of different sectors so as to overcome the current challenge and for companies to sustain their operations instead of experiencing further decline and shut down.

Stakeholders commended the various CBN funding windows but decried the poor implementation which has hindered the attainment of the noble objectives of these funds, thereby forcing many small businesses to wind up.

The Chairman, Lagos Chamber of Commerce and Industry (LCCI), MSMEs Group,  Daniel Dickson-Okezie, who disclosed that 85, 000 MSMEs closed shop in that period, according to  KPMG statistics, also noted that 20,000 to 22,000 MSMEs wound up in Lagos in the same period.

“From KPMG statistics and research 85,000 SMEs closed down in Nigeria and about 20 to 22,000 shut down in Lagos between 2020 and 2021. I don’t have the statistics, but KPMG is a reliable agency.”

He noted that the small businesses shut down  as a result of COVID -19, forex and other challenges,  admitting that SMEs were going through a lot of difficult times in the history of the country, “so I’m not surprised at the figure. 

“Already, the economy was in bad shape before the pandemic hit the country, which led to a lockdown that devasted almost every sector.

The aggregate demand dropped . People needed the purchasing power to buy because income decreased as they were locked in for sometime..

To make the matter worse, rising cost has been a major challenge to SMEs. Cost of electricity, fuel, virtually cost of  everything increased; market price increased. When inflation rate is high, forex not favourable , exchange rate is getting worse by the day, at the end of the day it’s difficult for SMEs to do business  because they have lesser capacity to withstand shock and the challenges of business.

“These challenges affect all businesses not just small businesses, but the big ones or the multinationals have better capacity to withstand any decline or sudden challenge. 

“The situation at the ports is not making things better. Importers impute all the cost of importation, clearing and movement, at the end of the day MSMEs bear the final cost, because most small business owners are not importers. 

“Infrastructure is decaying by the day for lack of maintenance..

“These challenges make it difficult to do business.

“For the case of funding, the bigger businesses have better opportunities. They find it easier to source funds for their businesses unlike the SMEs .

“As chairman of SMEs Group in the chamber, member of council and Advocacy Committee and member of other business organisations and the organised private sector, I stand to say that these loans  and funds from the federal government have not been received by SMEs, as they complain each day of having not accessed the so called loans. 

“In a summit by stakeholders supporting SMEs, which was chaired by the  commissioner for cooperatives,  the commissioner alluded to the fact that business owners were complaining that they were not getting the funds.  The issue has been a major source of concern ..

“We are still interfacing and advocating . Recently we met with the deputy governor of the CBN and the director of  Development Finance, Adedeji . We agreed that the disbursement of SMEs funds henceforth should be done through the Business Membership Organisations (BMO) .we have agreed with CBN and with other government regulatory agencies that any disbursement of fund should be transparent and better still pass through the BMOs- the organised private sector. That is the position.

“Doing business in Nigeria ,the businesses owner is at the nagative receiving end. Infrastructure is decaying daily, security is a major threat to all businesses not just SMEs. In a meeting of the chamber with service chiefs,  chief of Army staff, and major stakeholders on “Security meets business”,  we raised the issue of investors not likely to  invest in the country which is unsafe as the  security situation is deteriorating by the day. 

“Some SMEs have shut down while some that are still struggling to survive are relocating from the North to other parts of the country and safer climes as moving goods  has been challenging. 

“Our roads are death traps, like the Okene- Lokoja road, if accidents don’t kill due to bad road, bandits will molest and kill travellers. ..

“We have really been battling   multiple taxes which have been ravaging SMEs.  We got up to a point that we were able to make sure that businesses that are  not making up to 25million turn over are exempted from VAT in the finance act. The challenge we have now is the local government taxes. We are trying to handle multiple taxes at both the local and state levels.”

For her part, Chairman, National Association of Small Scale Industrialists (NASSI), Lagos Gertrude Akhimien, decried the security situation, saying it has forced many SMEs out of business.

“Insecurity is a major reason for the shut down of many SMEs. Many SMEs who are into production need raw materials which they have not been able to access due  to the security situation especially in the Northern part of the country. 

“Small business owners are afraid to risk their lives due to the senseless killings and kidnappings. So the little raw materials that come in are expensive and at the end of the day there is no profit. As I talk to you now, five bakeries just shut down. The bakery section just raised alarm of the continuous rise of raw materials as such many have closed shop waiting till price stabilises . If price keeps increasing consumers cannot buy they rather make alternatives. 

“These are not make believe stories. With the spate of killing and kidnapping the country is not safe for business. I agree with the figure that 85,000 SMEs have shut down, because I’m having the same experience in the association. 

“Members are lamenting seriously, Getting market for their goods is quite difficult, as purchasing power has gone down and people are prioritising their needs  now. .

“For funds, SMEs are not getting the funds from the FG, how can they remain in business .Nothing seems to be working. Nigeria is celebrating Independence in a very low mood due to the terrible situation.”


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