Small and medium Enterprises (SMEs) are at the risk of closures and large staff layoffs, no thanks to the lockdown caused by the corona virus impact. But there is a way out, writes DANIEL ESSIET.
Small and Medium Scale Enterprises (SMEs) make up the bulk of businesses in Nigeria.
For the government to achieve sustainable growth, these firms must grow and create jobs.
However, the shutdown in the country has affected the fortunes of many SMEs.
Aggregated losses are estimated at milions of naira, according to analysts.
This comes on the back of naira devaluation and the border closure that has sent raw materials’prices rocketing in the past year.
Following this, SMEs are in dire straits because of the coronavirus outbreak. Thousands of small businesses could shut down, if the much-needed financial relief doesn’t get to them in time.
As the outbreak spread, the Federal and state governments have shut markets and halted long-distance movement.
This has created massive problems in the SMEs sector. As a result, a lot of entrepreneurs are in a very distressed situation.
Leaders in the sector, though appreciating the government’s plight are concerned that the measures to control the spread of the pandemic have led to economic problems.
Speaking with The Nation, the President, Association of Micro Entrepreneurs of Nigeria (AMEN), Prince Saviour Iche, expressed fear of a sudden surge in layoffs as well as shutdowns of many small manufacturing businesses.
For him, the scope of layoffs would help determine how badly the outbreak would damage the economy.
To prevent this, he wants the government to set aside billions of naira as loans to small businesses and for liquidity assistance for specific industries.
According to him, COVID-19 has resulted in mass production shutdowns and supply chain disruptions, adding that it has caused ripple effects across all sectors, especially the SMEs.
According to him, most small businesses do not have the financial muscle to pay workers for long, if their earnings dry up.
He said to cushion the effects of the pandemic, the government has to grant financial incentives to small businesses that retain workers instead of laying them off.
The measures include loans, and tax credits.
He said small businesses need support because they are struggling with border closure which made it difficult for them to get raw materials.
He urged the government to implement measures that would mitigate the effects of the virus on the economy. These, he said, include reducing interest rates and injecting liquidity into the banking system.
Iche observed that the business climate was still too harsh to encourage more investments from small businesses.
Colloborating, the President, Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, said COVID-19 has begun to impact on the small business sector, with the prices of essential ingredients for local production manufactured in China rising or being unavailable.
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He said before the pandemic there was the impact of border closure that restricted imports of essential ingredients, which led to a shortage in the country.
For instance, he said sachet and packaged water producers were battling high cost of production materials.
He said one of the raw materials used for sachet water production is imported from China. From N600,000 a tonne, Egbesola said the price has risen to N1.3 million since the border closure.
Despite this, he said the producers have managed to produce without increasing the prices. He said the retail price of the ‘pure’ water sachet bag is still sold at the same price, adding that there was no price adjustment due to hike in the cost of raw materials.
According to him, the hike has hit them and they must get their head above water to survive.
As a result of the lockdown, he said the small business sector loses an estimated N9 billion weekly since the government took the decision to restrict trading activities.
He said the industry has been scrambling to react since the market closure caught a lot of entrepreneurs and small businesses unprepared.
Meanwhile, the Central Bank of Nigeria (CBN) has announced a credit relief of $136.6million to businesses affected by the pandemic.
The CBN Governor Godwin Emefiele said households, small and medium-sized enterprises, airline service providers, hotels, health care merchants will benefit from the funds.
“The CBN hereby establishes a facility through for households and small- and medium-sized enterprises (SMEs) that have been particularly hard hit by Covid-19,” he said at a news conference.
He noted the pandemic has “significant adverse consequences” for the global and Nigerian economies, including crude oil supplies, stock, sporting events, financial markets, entertainment and hospitality industries.
Other interventions announced by the bank include reduction of interest rates for the loan from nine to five per cent retroactively.
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