A month has passed since President Bola Tinubu made a commitment to support the Micro, Small, and Medium Enterprises (MSME) and manufacturing sectors in response to the impacts of petrol subsidy removal and naira devaluation. However, businesses in Nigeria have yet to witness any tangible evidence of these funds being disbursed. The specific criteria for disbursement, requirements, terms and conditions, prospects, and the responsible agencies have not been communicated.
In recent months, increasing inflation has eroded the purchasing power of consumers, and businesses have faced heightened operating costs, leading to the closure of many small enterprises. Gabriel Idahosa, the Deputy President of the Lagos Chamber of Commerce and Industry (LCCI), expressed the sentiment that the announcement about the funds is all that has been seen so far, with no confirmation of funds being allocated to implementing agencies. The LCCI had recommended a swift implementation of these intervention funds when the President initially made the announcement, but this has not materialized. Ideally, if the funds had been released in June, the implementation processes, application procedures, and conditions would have been rolled out by July, enabling businesses to access the funds by August.
Femi Egbesola, the National President of the Association of Small Business Owners of Nigeria (ASBON), stated that the only information they have received about the fund is the announcement made by the presidency.
He emphasized that there have been no instructions or details regarding the terms and conditions, requirements, application procedures, or screening processes for accessing the funds. Additionally, there has been no sight of the initial beneficiaries of these funds. He expressed his confusion and concern, noting that this is not the usual procedure for such initiatives.
President Tinubu had announced during a national broadcast on July 31, 2023, that his government would allocate N125 billion to bolster the MSME sector as a measure to mitigate the effects of petrol subsidy removal.
He also mentioned allocating N50 billion for Conditional Grants to one million nano-businesses by March 2024, providing each of them with N50,000. Furthermore, the plan includes funding 100,000 MSMEs and startups with N75 billion, allowing each enterprise promoter to access between N500,000 to N1 million at an annual interest rate of 9% and a repayment period of 36 months.
The N75 billion is intended to be spent between July 2023 and March 2024 to strengthen the manufacturing sector and enhance its capacity to expand and generate well-paying jobs.
“Our objective is to fund 75 enterprises with great potential to kick-start a sustainable economic growth, accelerate structural transformation and improve productivity. Each of the 75 manufacturing enterprises will be able to access N1 billion credit at nine percent per annum with maximum of 60 months repayment for long-term loans and 12 months for working capital,” he said.
Segun Kuti-George, national vice president of the Nigerian Association of Small Scale Industrialists, said the government could be working on the modalities for the implementation but at least business organisations should know where the money is, who is going to be in charge of it and who will distribute it.
“A lot can happen in one month. If nothing is done, many businesses could shut down. But if there is a lifeline the story will be different,” he said.
Since May 29, when President Bola Tinubu announced the removal of the petrol subsidy, petrol price has tripled to N617 from N184, while the value of the naira has plunged following the floating of the currency.
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The floating of the currency has increased the official rate from N463.38/$ to N 738.18/$ as of Tuesday. The gap between the official and black market expanded to N187.
According to the National Bureau of Statistics, the inflation rate rose to a near 18-year high of 24.08 percent in July 2023 from 22.41 percent in the previous month.
The latest Purchasing Managers’ Index by Stanbic IBTC Bank shows that business activities in the country dropped to 51.7 in July, the lowest in four months, from 53.2 in the previous month.
“Rising price pressures impacted demand, with growth of both new orders and business activity softening as the second half of the year got underway,” analysts at Stanbic IBTC Bank said.
Data from the Nigerian Exchange Limited shows that foreign investment in Nigerian stocks fell last month to its lowest level since Tinubu’s reforms that sparked a massive rally in the equities market.
The total amount of stocks bought by foreign investors plunged to N9.45 billion from N22.72 billion in June
Abdulrasid Yarima, president/chairman of the governing council of the Nigerian Association of Small and Medium Enterprises (NASME), said members of his association are concerned as they are yet to hear from the federal government because the number of MSMEs closing shop is increasing.
“Just like everybody else, we had the expectations that the interventions would start immediately. We have even requested for a consultation visit to interact with the new minister but she is yet to respond.
“We did the same to the vice president who is the chairman of the MSME council but since June, he has yet to respond,” he added.
Temitope Ajayi, senior special assistant to the president on media and public affairs, while speaking with BusinessDay on the delay, called for patience, adding that the president is mindful of his promises to Nigerians.
“As you are aware, the ministers just assumed office barely a week ago especially Wale Edun, the minister of finance and coordinating minister of the economy and Doris Anite-Uzoka, his industry, trade and investment counterpart, who will drive these programs as they affect the manufacturing sector, small and medium scale businesses,” he said.
He said the two ministers were working out the modalities for implementing these policies to ensure that all Nigerians benefit from the program and that no one is left out.
small businesses were shutting down as a result of the surge in petrol prices occasioned by the subsidy removal and the naira devaluation.
NASME reports that approximately 10 percent of the 40 million MSMEs in the country have ceased operations since the removal of subsidies. ASBON, on the other hand, estimates that more than 20 percent of their 27,000 members have been adversely affected by the growing economic challenges.
As per a BusinessDay report from July, small businesses have been forced to close due to the sharp increase in petrol prices resulting from subsidy removal and the devaluation of the naira.
The abrupt announcements by the government have created anxiety and expectations among businesses. Many of these businesses have endured significant losses over the past three years due to factors such as the Covid-19 pandemic, elections, a shortage of foreign currency, the removal of petrol subsidies, and currency devaluation, according to a statement from an official at MAN (Manufacturers Association of Nigeria).
The official suggested that investors exercise patience and lower their expectations for a brief period. Additionally, the government and ministers should begin establishing criteria for fund distribution, specifying conditions and percentages, to prevent potential misuse by the political class.
The MSME sector plays a crucial role in market economies by driving economic growth through the creation of new products and services, which in turn leads to increased employment opportunities and overall economic development. In Nigeria, this sector contributes 50 percent of the GDP and accounts for over 48 percent of total employment, as reported by the United Nations Industrial Development Organisation.
However, small business operators in Nigeria face a multitude of challenges, including unreliable power supply, rising borrowing costs, surging inflation, restrictive economic policies, foreign exchange rate fluctuations, and complex taxation systems. The Small and Medium Scale Enterprises Development Agency of Nigeria has noted that 80 percent of SMEs fail before their fifth anniversary, primarily due to harsh economic conditions, limited access to capital, and poor business practices, which hinder the growth and sustainability of micro-businesses..
