According to industry reports, MSMEs experienced only marginal growth during the period, partly supported by FX stability—yet these gains were offset by skyrocketing prices and shrinking disposable incomes. The Association of Small Business Owners of Nigeria (ASBON) noted in its Q1 findings that while improved FX liquidity helped some businesses, high borrowing costs, surging operational expenses, and unreliable energy supply severely dented profit margins and inventory turnover.
Industry analysts and SME stakeholders have called for urgent economic realignment measures to improve SMEs’ performance, profit margins, sales peaks, and capacity utilization. They argue that without strategic collaboration, innovation, and robust policy reforms, the sector will continue to face supply chain disruptions and sluggish growth.
In a telephone conversation, ASBON National President, Dr. Femi Egbesola, emphasized that while FX stability and inflation moderation could gradually rebuild investor confidence, more needs to be done. He noted that the forthcoming tax reform bill, expected to kick off in Q2 2025, could ease energy prices and offer some relief to MSMEs.
However, Egbesola pointed out that access to FX remains uneven, with larger corporations benefiting from official commercial bank rates while SMEs often resort to the black market at higher rates, eroding their competitiveness. He further disclosed that limited access to imported raw materials continues to hinder manufacturing and industrial activities among smaller enterprises.
Highlighting the dire state of the sector, Egbesola revealed that over 7.8 million MSMEs had shut down in the last two years due to a combination of harsh business environments, inflationary pressures, over-taxation, and lack of access to affordable finance.
He stressed the need for government support through low-interest credit facilities, grants, tax reliefs, and repayment moratoriums to revive the sector. Additionally, he encouraged MSMEs to explore export opportunities, particularly within Africa under the African Continental Free Trade Area (AfCFTA) agreement, to earn foreign currency and mitigate domestic challenges.
Meanwhile, the Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, also lamented the crippling impact of rising electricity costs. He noted that recent Band A tariff hikes exceeding 200 per cent have significantly raised operational expenses.
Ajayi-Kadir revealed that finance costs have surged, with the average lending rate to manufacturers spiking to 35.5 per cent in 2024, up from 28.06 per cent in 2023. As a result, total finance costs rose to N1.3 trillion, stifling capital expansion and investment across the sector. He called for urgent reforms in forex management, energy costs, and interest rates, stressing the need for a predictable and supportive policy environment.
Echoing similar concerns, Charles Odi, Director-General of the Nigerian Association of Small and Medium Enterprises (NASME), noted that despite a slight decline in Nigeria’s inflation rate to 23.18 per cent, real consumer prices remain prohibitively high. Many small businesses, he said, struggle to replenish stock as goods have become unaffordable to the average consumer.
Odi also expressed support for the Standards Organisation of Nigeria (SON) certification policy, citing the importance of ensuring product safety and quality. He urged shopping malls and retail outlets to implement robust internal compliance systems to maintain consumer trust and loyalty.
In summary, while there are glimpses of macroeconomic improvements, MSMEs in Nigeria remain under severe pressure. Stakeholders are united in calling for comprehensive reforms aimed at lowering operating costs, improving access to finance, stimulating consumer demand, and fostering an enabling environment for sustainable growth.