Micro Small and medium enterprises (MSMEs) are the important driving forces for economic growth of Nigeria, Africa’s most populous country. They occupy an important position in the economic development of any country, especially in the case of Nigeria, which is a commodity market with no fewer than 37 million micro businesses. TOBORE OVUORIE after several interactions with micro businesses in the country, writes that despite such a huge importance to Nigeria’s economic growth, the MSMEs are battling for survival in the face of multiple pummeling by COVID-19
REIGN OF STAGNACY
“Since the coronavirus started, the business is dull; everything is dull. Nothing is moving as before because people are not going out. Since they are not moving out, they cannot make money,” Alex Adibemma, who runs a local medications retail outlet popularly referred to as ‘chemist shop’ in many parts of Nigeria, stated.
He also sells daily household consumables such as bread and drinking water, amongst others. This reporter had monitored his store located at Osaro, Akute, Ogun state for over two weeks and observed the shelves accommodating the medications became scantier every day. When she approached him for an interview for this story on May 18, the shelves were completely deserted, but for the loaves of bread and other daily consumables sitting in lonely corners of the once very busy store.
Adibemma said though President Muhammadu Buhari had partially eased the lockdown since May 4, there is yet no improvement in his business because people are still not moving out as such. “People are afraid. They only go out to get what they want and quickly return home. Whether they make money or not, they pick one or two things and go back to their homes. Nothing is moving at all.”
DAILY PRICE HIKES OF CONSUMABLES
A few days to the commencement of the COVID-19 lockdown, which began on March 29 in Lagos and the Federal Capital Territory, then a week later in Ogun state, this reporter had gone to various markets and stores in Lagos and Ogun states respectively, taking note of the prices of major food items consumed by families. After the announcement of the partial easing of the lockdown which became effective May 4, she has been monitoring prices of same items and observes prices are being hiked daily.
Before the advent of coronavirus in Nigeria and subsequent lockdown, a regular sliced loaf of bread sold for N250. But after the partial easing of the lockdown, it goes for N300 in some places while other retailers who do not buy directly from bakeries sell theirs for between N350 to N400. Adibemma sells his for N300.
“It is because of the way I bought it from the bakery. When I inquired, I was told that prices of baking materials are now very expensive. So, for them not to lose, they have to increase the price in order to make some profits, too,” he explained.
Owners of other micro businesses interviewed for this story explained prices are being hiked at all phases of production until the goods get to the final consumer because profits are meant to be made in businesses. They further explained their businesses are going through tough times as well. Their profits are now so reduced compared to before the onset of the coronavirus but they cannot shutdown their businesses since they have nothing else doing.
Adibemma said a family size unsliced loaf of bread, which he used to sell at the rate of N400 pre-COVID, is N450 because he buys directly from bakeries. The same loaf is sold for N500 at other places this reporter visited. Retailers and bakers interviewed for this story say prices of nylons, sugar, salt and even flour have skyrocketed, leaving them with no choice than to increase the price of the finished product.
Local bakeries, this reporter visited in Lagos and Ogun states respectively, lamented sugar is very scarce in the market. The few shops that have sugar sell at incredulous rates, so, they are left with no choice but to also increase the prices of bread.
A sachet of water Pre-COVID used to be sold for three N20 in certain parts of Lagos state and in most parts of Ifo, local government area of Ogun state. This is no more the case as retailers sell a sachet of water for N10. Packaged water producers whom this reporter interacted with for this story claim that the nylon used in sealing the water and packaging them into a bulk of 20 sachets per bag was now expensive.
Bottled waters are still being retailed at N50 each but the bulk purchasing price from the producers has been hiked. Before the emergence of the coronavirus and lockdown in Nigeria, water producers used to sell to retailers at N400 per pack. A pack contains 12 bottles of water.
But the same pack is being sold to retailers at N500 per pack. The sellers however bear the cost of the price hike because increasing the retail price of bottled water will be at their own detriment as not many Nigerians buy bottled water. But that of sachet water has been increased from between N100 to N120 (Pre-COVID) to N150 to N160 per bag.
Adibemma said he is learning to develop a thick skin to cope with the unpleasant twists in his business. “We need to survive that is why we are still selling. We cannot stop our business because of price hike. We are managing the little gain we get,” he said explaining why he still turns up daily at a deserted store.
His message to the government is: “Please, help the masses in any way they can. If they can give soft loans or bring down the prices of goods with their power so that the masses can survive, it will be greatly appreciated.”
‘NO MONEY, NO MARKET!’
President Muhammadu Buhari on March 29 declared a total lockdown in Ogun, Lagos and Federal Capital Territory, Abuja in a bid to contain the coronavirus which Nigeria and the rest of the world is struggling to curb its spread.
The total lockdown lasted between March 30 and May 3 before a partial ease was announced but with lots of restrictions with effect from May 4. Schools, businesses, airports, borders, worship centres, human and vehicular traffic are severely restricted except essential service providers such as healthcare workers, security operatives, petroleum distributors, power generating transmitting and distribution officials, the media and food processors.
However, the latter in the group- food processors who are essential service providers are operating skeletal services when compared to their Pre-COVID operations. This means, the end consumers in the supply chain bear the financial brunt.
“Business was booming before the advent of coronavirus in Nigeria but business is now very dull, while prices of commodities have been hiked. What we used to buy at N10, we now buy at N200. After buying at expensive rates, customers yet complain bitterly but we the sellers don’t make profits anymore. We are just managing,” Obinna Onyekachi narrated on May 19 at his store where he sells food items such as garri, rice, amongst others on Adebowale Street, Ojodu Berger Lagos.
Onyekachi says the partial easing of the lockdown has had no positive impact on his business whatsoever. He says prices of commodities are on the increase every day. For instance, sachet tomatoes, which was being sold at N50 was selling for N60. Pre-COVID, a bag of foreign rice was sold for between N20, 000 to N24, 000. But it was selling for N28, 000 per bag then.
Nigerian rice is N20, 000 and N22, 000. This is the white type without stones. Pre-COVID, the latter used to be sold between N17, 000 to N18, 000 per bag while the variety with stones was sold between N15, 000 to N16, 000.
Onyekachi says he is still in business just to make turnover. “We buy these goods quite expensive and our customers don’t believe us when we explain our plight to them. We buy the foreign rice at N27, 500. Bringing it to the shop costs N300. So, we are using N200 to sell each bag,” he explained.
He says no one can be blamed for the daily hike in prices of commodities. According to him, many persons were not working and managing the little money they had. He called on the government to come up with effective assistance programmes not only for business owners like him but those at home for various reasons such as losing their jobs.
Onyekachi also stopped credit sales. “Credit now is trouble because I cannot ‘drag with them’. Even if I ‘drag with them to Police station’ I will lose the case because there is no money anywhere to pay me. So, no money, no market.”
PHENOMENOLOGY OF MSMEs IN NIGERIA
Nigeria’s National Bureau of Statistics, in its June 2018 publication, revealed the nation was struggling with a huge predicament of youth unemployment. According to the NNBS, it has increased to all time high.
However, a survey carried out by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in conjunction with National Bureau of Statistics (NBS) revealed that there were 37,067,416 MSMEs firms in the country as at 2013. In this total aggregate, there were 36,994,578 micro businesses while small businesses were 68,168. According to the report, the Medium sized businesses in Nigeria were 4,670.
The 59,741,211 persons were employed by the sector as at December, 2013 represent 84.02 percent of the Nigeria total labour force. In addition, the Micro, Small and Medium Scale Enterprises’ contribution to the nation’s Gross Domestic Product (GDP) in nominal terms stood at 48.47percent while the sector’s contribution to exportation also accounted for about 7.27 percent total volume in the same year.
Reports by the International Council for Small Business (ICSB) indicates that MSMEs make up over 90 per cent of all firms, provide up-to 60 percent employments, and account for 50 per cent of GDP of any economy.
The small and medium sized businesses also boost the economy in most different areas such as employment creation, poverty reduction and industrial development, among others.
According to financial experts, the sector holds immense potential for generating employment opportunities for Nigeria’s ever increasing population, boost the development of indigenous technology, diversification of the economy and forward-integration with established sectors in Nigeria such as the banking industry, telecommunication sector, oil and gas, among others.
IMPACT OF COVID-19 ON MSMEs
Despite such huge importance to Nigeria’s economic growth, MSMEs face enormous challenges such as business financing and information promotion. Unfortunately, COVID-19 added greater economic uncertainty and much lower consumer spending to the mix. Micro business owners this reporter interacted with for this story say the latter is the greatest challenge so far for their small businesses’ growth and survival.
In a research- survey, carried out on the field and via the phone among 58 micro business owners, in Ogun, Lagos, Oyo and Rivers states respectively as well as the Federal Capital Territory, Abuja, 41 of them said they were experiencing lower consumer spending, nine said they were not experiencing such while eight said it was neither here nor there for them.
Of these 32 men and 26 women micro business owners surveyed, 35 of them said they feel very uncertain about their businesses’ future while 20 do not feel that way. Just three said they feel “somehow” about it. The 20 who feel certain about their businesses’ future reported being hopeful for a change if they are alive, cling onto various religious scriptures and rejecting any form of failures in their lives as a result of religious inclinations.
All 58 entrepreneurs said the partial ease of the COVID-19 lockdown has had no positive impact on their businesses. They all reported prices of commodities are not the same as pre-COVID era. They all shared same lamentations with this reporter.
Long before the advent of the coronavirus in Nigeria, 23 of them said they had been able to access loan facilities for their businesses, while 35 said they have never been granted loans for their businesses.
All of the respondents reported they have not been able to access any loan facility since the easing of the lockdown but will appreciate such facilities for their businesses.
Mr. Bismarck Rewane, a Nigerian economist, has words of encouragements for micro business owners and other entrepreneurs: they should be patient. Speaking in an exclusive interview, he explained consumer demand is lower because of the lockdown and shutdown, noting that it is a global phenomenon resorting in hard times for all businesses.
He explained the government was putting in palliatives to help though it may not be sufficient to address the magnitude of problems now prevalent in the country. “Half bread is better than none, so, it would take some time; once there is life, there is hope. Everybody should be patient,” he said.
Tope Fasua, an economist, in an exclusive interview, emphasised that Nigeria’s economy has been unstructured for so long, which was why many persons find themselves on the entrepreneurship path. Highlighting that there are no infrastructure in place for SMEs in the country while security is so poor, he said COVID-19 has forced micro business owners to be home, even as long as three months.
“I think our politicians need to be extremely careful and sensitive because how do we expect these people to survive? How do their businesses survive?” he queried.
Giving an in-depth analysis of future global economic trends, Fasua said: “If we look into the future; a future that will be run by technology, a super-efficient future where we would rely more on robot and high technology, then it’s looking very bleak for entrepreneurs in Nigeria, especially solopreneurs struggling to survive from day-to-day.”
He stated government must acknowledge these problems and know it is its duty to provide employment for the citizenry, noting it must assist SME through provision of intervention funds.
Fasua stated that a lot of education about the intervention funds to SMEs needs to be done. It is very crucial SMEs are enlightened that the funds are not free money and must be repaid, he added.
FOOD ‘SCARCITY’, CUSTOMER APARTHY AND STRICTER SELLERS
“Market was moving well before corona started. But when they started saying lockdown, lockdown, there has been no business and prices are being hiked every day. What we used to buy N20,000 before, we now buy at the rate of N30,000. Then, after we have bought the goods, to sell them become difficult because people are complaining that things are still cheap but we are the ones cheating them,” Samuel Peter, a 27- year- old micro business owner, who sells uncooked food items in bulk and retails tells this reporter at his shop in Ifo local government, Ogun state.
He says the partial ease of the lockdown has had no positive impact on his business. “Everywhere is still dull and you can’t force people to buy because they don’t have the money.” Mr. Peter says if the Nigerian president wants Nigerians to continue the lockdown, it would be good but he should make necessarily provisions which would make the isolation successful.
He says people are afraid of working, while farmers too are staying away from their farms because “they don’t know where the disease (coronavirus) comes from”.
A paint bucket of white garri before the advent of coronavirus in Nigeria was sold at the rate of N300 but was selling for N700 while yellow garri that used to be N400 went for as high as N900. This, it was gathered, was because farmers and producers of these food items were no more working like they used to pre-COVID.
All MSMEs interviewed for this story lamented the hike in fare. They pay so much to transport the purchased goods to their shops. Consequently, the cost of transportation is added to the final price of the goods before being sold to consumers.
Peter has adopted same principle as Onyekachi: No credit. According to him, customers depend a lot on credit but that won’t longer be realisable. “I don’t sell credit anymore because you cannot force someone that doesn’t have money to court. If such happens, he/she will still tell the truth at the court that he doesn’t have money to pay,” he explains his reason for the new and strict business rule.
MSMEs IN GLOBAL ECONOMIC DEVELOPMENTS
The MSMEs are the backbone of successful economies like the United States of America, European Union and China where over 43 million small businesses employ about 60 to 70 per cent of the overall workforce and generate more than half of the nations’ GDP.
Financial statistics indicate as of 2016, there were 28.8 million small businesses in USA, (compared to 18,500 large companies in same country), which accounted for 99.7 percent of US businesses.
In December 2016, private-sector employment increased by 1.7 percent as the United States small businesses employed over 57.9 million people.
23 million of these businesses are self- employed and home-based, showing that small businesses are the biggest employers of labor, job creators, and contributors to the GDP.
The US has a GDP that is almost $17 trillion, which is a quantitative measure of the United States’ total economic activity.
A report by Liberty Capital Group also indicates that “around half of the American workforce is employed by small businesses, and almost 67 percent of all new jobs are generated by small businesses”.
MSMEs: CHINA’S REALITY
Several financial reports indicate MSMEs are the important driving forces for the economic growth of People’s Republic of China, a populous country in East Asia.
MSMEs in China are considered quite bigger, relative to that of Europe or the United States when looking at the labor intensity in the production and the huge size of China as a nation, which had a 2018 projected population estimate of 1,394,102,196. According to China’s Bureau of Statistics (CBS), the number of MSMEs rose to over 40m in 2004.
In 2015, a report from the China Statistical Yearbook indicated that MSMEs make up about 97.9 percent of all registered enterprises in China. They also contributed nearly 58 percent of the China GDP, and 68 percent of the total export volume.
MSMEs are playing significant roles in employment creation in China; with the number of employees in MSMEs sector amounting to average of 82 percent of total employees in the country. This implies that they are responsible for the creation of nearly 75 percent of the new jobs every year.
WAY FORWARD
Rewane emphasised that the COVID-19 is not all gloom; it presents an opportunity for investments, especially international investments. He noted that for these to happen, Nigeria’s fundamental issues must first be properly addressed, thereby increasing the level of confidence within and outside the country.
“More than anything else we have to encourage investments. This is a time when international investments can be useful. And, investments will not come until we address some of the fundamental issues.
“What you (this reporter) are saying is true, I agree with it and I feel it is time we increase the level of investments and confidence. Investment is as a function of confidence. As long as there is no confidence, there will be no investment. Every penny counts in investments.”
Professor Sheriffdeen Tella, a renowned Nigerian monetary and financial economist, says traders of daily consumed items such as food and medications have an advantage over their counterparts who sell other items or render other services. “People consider consumption first before any other thing,” he explained.
According to Tella, consumer demand is low because there is no money and when money is scarce, consumers’ consumption level become lower. He explained that entrepreneurs might not be able to make much money because potential customers’ income is low as many persons have lost their jobs. He noted that those who were not employed before the lockdown might not be able to secure employment on the immediate because the demands for employees have also gone down.
In his analysis, people who are dependent on others might not be able to get so much money anymore because their benefactors are also struggling with incomes. Tella said the general recession would affect them as well to the extent of not being able to dole out cash easily anymore.
He said the general uncertainty amongst business owners is normal in times of recession such as that which the COVID has birthed but emphasised that those who are into basic needs such as food, medications and essentials such as personal grooming- hair making, would still have patronage.
Tella says the Nigerian government should give SMEs some intervention funds but these must be monitored because the Nigerian system is “about who you know.” He highlighted nepotism as the problem that may flaw the disbursement of the intervention funds but suggests the SMEs should organise themselves into cooperatives in their various associations to access funds from the Bank of Industry (BOI) because it provides funds for both small and medium, as well as large scale enterprises.
His advice to government: “They must advertise where this money can be made available so that people would know these are the ways by which they can get intervention funds. And, that have to be properly monitored; they must give room for complaints so that people can complain if they are missing out because in Nigeria, even those who are not SMEs, would collect money as if they are small scale entrepreneurs which is not good enough. Until we change our orientation, we would keep having that problem.“
Tella says the MSMEs must form the cooperative and associations by themselves for that is the easiest way for their association or cooperative body to expose the problems they are facing in accessing the intervention funds.
“Now that the Central Bank has devoted some money for small scale enterprises, we don’t know where they are going to pass through- whether through the Bank of Industry or give directly to those businesses. But they must form themselves into associations. Being in associations will assist them in getting these fundings that we are talking about,” he stated.
RE-INVENT NIGERIA’S ECONOMY
Fasua recommends that beyond giving the SMEs loans at the moment, the economy needs to be re-invented from the scratch. “COVID is an opportunity for the scope of entrepreneurs to be expanded; to challenge them in different areas before globalization would come with a vengeance.”
He further recommended Nigeria should have a huge (coronavirus) budget just as other countries are doing towards recovering from the crisis birthed by COVID-19.
Currently, the total percentage Nigeria has made is not up to three percent of the country’s GDP. Financial experts such as Fasua say this is abysmally low. Worse still, it shrinks further when compared with African nations such as South Africa, which has been able to put together the total of Nigeria’s annual budget, specifically to recover from the COVID-19 pandemic.
“We have to be very experienced in terms of being bold to put big initiatives on ground and understand that what we need to get to, is not where we are coming from but to leap forward and beyond our every imaginations.
“Entrepreneurs, SMEs, Solopreneurs, will continue to be important to our economy….tax payers money, government money must be used to purchase locally and to build the capacity of our local entrepreneurs,” he concluded.
https://drive.google.com/file/d/1xN-LYAhdoN-1nNX-BzMMAXaXXfAZ-9ZG/view?usp=drivesdk
This report was facilitated by the Wole Soyinka Centre for Investigative Journalism (WSCIJ) under its COVID-19 Reality Check Project.
