In an environment traditionally famed for its lack of competitiveness, the plaintive cries of the micro, small and medium scale enterprises (MSMEs) in the face of persistent rise in the price of Automotive Gas Oil (AGO) and its negative impact on cost of operations in general have come under renewed focus. The cries are difficult to ignore. Reports suggest that the MSME operators have not only asked the Federal Government to intervene in tax holidays and regulatory forbearance to enable them to tide over the current headwinds, they also argue for innovative measures to drive the growth of the sector, as well stimulate business expansion, job creation and poverty alleviation.
The issues involved are no mere abstractions. There can be no denying that these are extremely difficult times for this class of operators. Aside their relatively small sizes that tend to deny them the manifold benefits of economies of scale, they are buffeted by those other traditional factors as cost and access to cheap loanable funds, ill-developed logistics and then the old plague of epileptic power supply. That is not mentioning the chaotic regime of multiple taxations that tend to render business operations a nightmare. And this is a sector that has only begun to crawl out of the lull imposed by the Covid-19 pandemic.
To these traditional headaches have now been added the burden of continuous rise in the price of diesel with which they are expected to run their power plants, and also to move their raw materials and finished products to their end users. We refer here to the astronomic rise in the price of the fuel from N300 at the beginning of the year to over N900 per litre, with the effects currently cascading through the entire economy.
Talking of the place of MSMEs in the nation’s economic matrix, they are known to contribute 48 percent of national GDP, account for 96 percent of businesses and 84 percent of employment, and based on the Nigeria Bureau of Statistics (NBS) figures, number 17.4 million. They also account for about 50 percent of industrial jobs and nearly 90 percent of the manufacturing sector. Such are their contributions that should make their legitimate concerns deserving of urgent national attention.
Yet, a notorious fact is that the MSMEs receive approximately 0.3 percent of total credits administered in the country.
Good thing: they are not asking for anything that has never been asked before. Among these are improved access to funding, and this at reasonable interest rates, an end to the stifling regime of multiple taxation, easing of the current procedures on registration and approvals, particularly from such agencies as National Agency for Food and Drug Administration and Control (NAFDAC) and the Corporate Affairs Commission (CAC).
To help bring down the cost of diesel, the Manufacturers Association of Nigeria (MAN) has suggested removal of the Value Added Tax (VAT). These proposals, which underscore the current exigencies, cannot even be described as extraordinary given the dire emergency the operators currently face and one under which the larger economy reels. In broad terms, they are in line with what the presidential committee on Ease of Doing Business has sought to achieve in alleviating the problems of the sector, but with limited success. The present emergency can only be said to have introduced a new urgency to the quest. To that extent, the broad proposals are in every respect, deserving of the Federal Government’s consideration and immediate action.