May 25, 2024

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WE CAN’T BREATHE! NIGERIAN BUSINESS OWNERS TELL TINUBU

We can’t Breathe!
Nigerian business owners tell TInubu

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Manufacturers, Micro, Small, and Medium Enterprises (MSMEs) operators, business leaders, and economic groups, yesterday, sent a save-our-soul to President Bola Ahmed Tinubu on the need to cushion the harsh effects of the new administration’s economic policies on businesses, lives, and livelihoods.

Despite the four Executive Orders (EOs) on tax signed by the President during the week, they spoke in unison that more needs to be done urgently for their businesses to be saved from failing.

Tinubu had signed four Executive Orders, suspending the five per cent excise tax on telecommunication services and the excise duties escalation on locally manufactured goods, among others.

The Special Adviser to the President on Special Duties, Communications, and Strategy, Dele Alake, announced the development while briefing State House correspondents, at the Presidential Villa, Abuja on Thursday.

However, aside from the challenges of multiple taxation that may have been addressed to an extent, they stressed the need to alleviate economic hardship quickly to make lives better holistically.

For instance, a good number of manufacturers and MSMEs operators have lamented the huge amount of funds, unplanned for, but which they have had to deploy to stay afloat since the removal of fuel subsidy. They noted that rising inflation and the high cost of energy to run their plants had tripled the cost of operations.

They also called on the government to quickly address the regulatory environment, which they observed is a factor that could derail the progress being made with economic policies being introduced.

SMEs, which are critical to Nigeria’s economic development, have contributed over 48 per cent – on average – to the national Gross Domestic Product (GDP) in the last seven years, according to the National Bureau of Statistics (NBS).

However, despite the significant contribution of SMEs to the economy, challenges persist that hinder the growth and development of the sector. Some of the manufacturers listed some of these to include lack of skilled manpower, multiplicity of taxes, and high cost of doing business, among others.

A 2020 survey report by PwC estimated the financing gap for Nigerian MSMEs to be about N617.3 billion yearly.

It listed obtaining finance, finding customers, and infrastructure deficit as the top challenges of Nigerian MSMEs, adding that the SME credit market, however, is notoriously characterised by market failures and imperfections.

Despite the numerous policies and measures that have been articulated by successive governments, the manufacturing sector’s contribution to the GDP has remained less than 10 per cent over the last five years.

The sector has remained largely import dependent, which has made it extremely vulnerable to external shocks. Productivity is also weak because of structural issues. These features create competitiveness challenges for the sector.

Many manufacturing firms have low local value addition, weak backward integration, inadequate forward integration, and low job creation potentials. All of these have consistently weakened the impact of the sector on the economy and the development process.

SINCE the beginning of the year alone, many manufacturers and businesses have suffered losses, vis-a-vis the naira scarcity and the uncertainty that surrounded the general elections, which they alleged led to a serious dip in sales for most manufacturing firms.

The Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, had hinted that the protracted scarcity of naira notes led to a 25 per cent dip in sales of manufactured goods.

Similarly, the National Vice President of the Nigerian Association of Small-Scale Industrialists (NASSI), Segun Kuti-George, also said the scarcity threatened the existence of MSMEs since most of their operations were cash-based.

With the removal of fuel subsidy and with the reforms in the foreign exchange sector, small business owners have also reported losses and setbacks in their operations.

The President of the Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola, said the consequent hike in the pump price of fuel has led to a sharp drop in sales, resulting in a decrease in liquidity.

He lamented that many small businesses were no longer running at profit level, stating that sales have dropped sharply and turnover is on the downside.

According to him: “This has inadvertently resulted to drop in production/sales capacity, job losses, decrease in cash availability and ultimately a handful of businesses had gone moribund or experienced total closure. It is indeed a sorry case,” he said.

According to him, the resultant effect of government’s many actions is already manifesting in increases in the prices of goods and commodities.

He said it was unfortunate that there were no palliatives put in place to cushion the negative effects of subsidy removal, particularly on poor households and small businesses before its eventual implementation.

This, Egbesola said, has added to the myriads of challenges besetting MSMEs at this time.

However, he recommended ways that small business owners could navigate the situation to ensure survival of their operations by downsising to the capacity of their current income.

He stressed that businesses should begin to look at other innovative ways to expand their market beyond the present, adding that online media was a veritable tool to achieve that.

For manufacturers, he advised them to begin considering sourcing alternative raw materials locally, while production should no longer be capacity-driven but solely demand-driven.

He added that diversification of businesses should be embraced at all costs, while value addition and creative packaging/branding should be considered in improving the sales of products/services.

Similarly, Partner & West Africa Tax Leader, Deloitte, Yomi Olugbenro, at a forum, gave statistics that SMEs account for 90 per cent of industrial businesses, 63 per cent of trade or agricultural companies and employ 86.3 per cent of the national workforce, while micro businesses alone account for 99.8 per cent of total SMEs in the country.

Olugbenro called for partnerships with business consultants to provide SMEs with technical support and create access to the market, as well as infrastructure-based policies that encompass efficient power distribution to developing industrial clusters.

The President of, the Lagos Chamber of Commerce and Industry (LCCI), Dr. Michael Olawale-Cole, also said SMEs were the engine room of growth of every economy globally and a major contributor to Gross Domestic Product (GDP). He called on policymakers to eliminate barriers and ensure physical and monetary policies, as well as interventions to promote small businesses.

The Director-General of the Nigeria Employers’ Consultative Association (NECA), Adewale-Smatt Oyerinde, on his part, noted that for businesses to stay afloat amid high energy costs, the government should quickly address the regulatory environment, which he identifies as a factor that could derail the progress that is being made.

He called on government agencies to align their activities for the achievement of the overall goal of the administration, which is to make the business environment more hospitable.

He added that it was also important for the government to take immediate steps to harmonise all taxes through a structured and growth-oriented reform process.

While the piecemeal reform approach is commendable, he explained that a holistic approach would serve the nation’s long-term purpose and benefit.

To further cushion the effect of the subsidy on businesses, the Chief Executive Officer of the Centre for Promotion of Private Enterprise, (CPPE), Dr. Muda Yusuf, said that the government needed to urgently engage with manufacturers so that details of the desired interventions could be discussed.

He said as soon as a minister is appointed, stakeholders’ engagement should come up immediately with manufacturers so that they could deal with the issues more comprehensively and sustainably.

On issues of high import duty on raw materials, he said it would make it difficult for them because manufacturers are contending with high import duty, single-digit depreciation, high-interest rate, port charges, and competition from Asian products, which is creating problems for them in the markets.

The only way out, Yusuf said, was to ensure that there are intermediate products whose prices are reduced and ways the government could intervene was to reduce the import duty on intermediate products that are not available locally.

Yusuf stressed the need for government to intervene on how to bring down energy costs by putting the cost of gas businesses use at a more reasonable value and for government to review the cost of gas being charged in dollars.

He also stressed the need to further recapitalise the Bank of Industry (BoI) and Bank of Agriculture, through development finance for the real sector, so that they could have more muscle to give credit at a more affordable rate and much longer tenure.

“If there is the need to peg it and subsidise the cost of gas for manufacturers, it would be a welcome development, because these things are easily traceable; they are not things you can easily export. Some subsidies are more manageable than others. Reducing energy costs for them is reasonable.

“Also, there is a need for patronage of what is made in Nigeria. We have the policy but there is no enforcement. Let government institutions ensure that they patronise what is made in Nigeria.