MSMEs Battle For Survival As Cash Crunch Worsens
Micro, Small and Medium Enterprises (MSMEs) are contending with a barrage of constraints now worsened by the cash crunch nationwide, as analysts predict further decline in Nigeria’s economy.
The furore and civil unrest that have trailed the new naira crisis in the country is almost no longer news. From the mayhem on the streets of Port Harcourt to the bonfires and hoodlums’ attacks in Lagos, suffice it to say that this situation has been one that has inflicted an unprecedented level of hardship on Nigerians across the board.
For many businesses, it goes without saying that the experience has been harrowing, disconcerting and deeply painful. Perhaps most affected in all of these have been the Micro, Small and Medium Enterprises, particularly due to the fact that many businesses in this category largely rely on cash-based payments.
The National Vice President of the Nigerian Association of Small and Medium Enterprises, Solomon Aderoju, said the hardship faced by MSMEs had become critical to the extent that many businesses had “collapsed.”
Aderoju said, “It’s terrible. It’s affecting us a very great deal because as you know, many of our businesses are cash and carry. So it has really collapsed our businesses. It is not a good story to tell at all.
“It is affecting everybody, but mostly to the MSMEs because its cash and carry mode of operation. Some of our members don’t believe in account operations. They believe in cash and carry, so it is quite unfortunate.”
According to Aderoju, the Central Bank of Nigeria ought to have taken a leaf out of the Bank of England’s playbook with regards to the process of phasing out the old notes, in a manner that would not unleash untold hardship on businesses and the citizenry.
He said, “Let’s see what’s happening in the United Kingdom. The UK also has changed their currency from Queen to King, and it will take them over a year to do that. So we believe that the old and new notes can still go concurrently. So the government has to really see how we can let the old notes stay and print the new notes.
“The mechanism is supposed to collect the old notes and give us the new notes. But in this case they collect the old notes and are not releasing the new notes. It’s quite unfortunate honestly. They should give us more time to do this if they are sincere enough. There must be sincerity of purpose if they want us to live in the country.”
The NASME vice president further noted that the poor sales occasioned by the naira scarcity would echo like ripples across a pond, and would negatively impact the ability of businesses to pay back loans to financial institutions who were already on the trail of the business owners.
On his part, the President of the Premium Bread makers Association of Nigeria, Emmanuel Onuorah, said the apex bank ought to have ensured that the necessary infrastructure to support a cashless economy was in place before implementing the new naira policy.
Narrating the difficulty associated with getting the Point of Sale terminal from the commercial banks, Onuorah regretted that many business, particularly the smaller ones, could not possibly have completed the transition to digital payments within the timeframe set by the apex bank.
This development, according to him, had birthed the harsh reality currently being felt by business entities.
He said, “We requested for a POS from our bank but they did not give us, for many months now, Access Bank did not give us. So what I did was to get to Moniepoint and Opay and they are serving us very well.
“At the end of every day, they will hold the money in the wallet and at the end of the business they transfer the money to our main account. It’s been serving us well.”
According to Statistica, there are about 41.4 million MSMEs in Nigeria. The International Labour Organisation, a specialised agency of the United Nations, said MSMEs account for 96 per cent of businesses and 84 per cent of employment in the country.
The ILO further disclosed that Micro, Small and Medium Enterprises contribute 48 per cent of Nigeria’s national Gross Domestic Product.
The Country Director of ILO, Vanessa Phala, stated this during the opening session of a workshop on promoting decent working conditions among personal protective equipment producing MSMEs in Abuja
She said MSMEs were primary platforms for enterprises that played a crucial role to employment, wealth creation and economic growth.
“Successful enterprises are at the centre of strong economies and societies. They create employment and raise living standards. MSMEs employ large proportion of the workforce.
“In Nigeria, SMEs contribute 48 per cent of national GDP, account for 96 per cent of businesses and 84 per cent of employment. This sector contributes significantly to alleviating poverty and increasing job creation,” she said.
However, many of these MSMEs, for all of their entrepreneurial tenacity and contribution to the economy, had yet to integrate into the rubric of Nigeria’s digital economy, which was fast embracing e-payment models and other channels that made payment seamlessly convenient.
Hence, with the naira scarcity that has restrained Nigerians from accessing cash for basic necessities, many MSMEs have been left in the wilderness, unable to provide basic goods and services to its teeming customers.
A renowned economist and academician, Prof. Akpan Ekpo, expressed concern that the cash crunch, which had crippled business activities for MSMES, would have far reaching consequences on the economy.
He said, “It will have a completely adverse impact. The GDP will reduce by almost 10 per cent because of the non-contribution of the MSMEs. It will affect output because they cannot do their business.
“So definitely, if they do their analysis well, going forward our GDP will drop tremendously because in most countries, MSME are the ones that grow the economy and yet they are having so many problems.
“MSME entails micro and small businesses, they are a large part of the informal sector and in Nigeria the formal sector is almost two-third of the economy. That is why we keep saying that even though it is a good policy, the timing and implementation is wrong. So definitely, it will affect output.”
Ekpo, who is a former member of the CBN’s Monetary Policy Committee, faulted the apex bank’s decision to redesign the naira notes for political reasons, noting that over 200 million Nigerians had been thrown into hardship as a result of the ill-timed implementation of the policy.
“You don’t mix politics with the economy, you have to be very careful. Just because elections are coming and people are buying votes, you don’t punish over 200 million people because a few people are going to be engaged in vote buying.
“You cannot have a situation where your own money is being traded. People are using naira to buy naira. They didn’t think through it,” he stated.
Ekpo continued, “That is why when you are mixing politics with economics you have to think of how you will mix it. The politics now has exceeded economics and we are in big trouble.
“What is happening now will take a long time to rectify, even after the elections. It is very sad, unfortunate and embarrassing, because they would have done better if they had done a wider consultation.”
In the same vein, the Deputy-President of the Lagos Chamber of Commerce and Industry, Mr Gabriel Idahosa, in a recent interview with TVC, said the situation had created a logjam for a section of businesses that still relied largely on cash-based transactions.
He said, “Since consumers don’t have access to their cash, there are a lot of products and services that you would buy with little money, and normally you would not do transfers.
“Whether you are a street-side vendor, a supermarket, or a manufacturer of fast moving consumer goods, you are directly affected by what is happening. Sales are coming down, our members are talking about it.
“The concern now is how quickly we can get out of the logjam where you have products to sell, and there are consumers who want to buy your products, but they don’t have the cash to do it. It is not everywhere you can do transfers.”
He further noted that due to excessive traffic on e-payment channels, many business transactions had to be conducted on the basis of relationship and trust, while other transactions broke down where suppliers did not have enough trust in the business owners to supply products without receiving full payments.
For Idahosa, the current naira scarcity was not a cash crunch as commonly being referred to, but a system failure borne out of the CBN’s poor planning and implementation of the new naira policy.
He urged the apex bank to immediately draw up emergency solutions to cushion the impact the situation had caused many Nigerians who were enduring an unprecedented form of hardship as a result of a crisis that could have been avoided with proper planning.
