SMEs’ Fortune In Zero-Subsidy Regime —Gbenga Kayode



The socio-economic aftereffects of the recent controversial removal of subsidy on petrol by the Federal Government of Nigeria have begun to manifest negatively, particularly in the observed lull in the day-to-day activities of many Small and Medium Enterprises (SMEs), the supposed fulcrum that forms the very basis of sustainable economic activities in the adjudged largest economy on the African continent.

It would be recalled that the government, through the Petroleum Products Pricing Regulatory Agency (PPPRA) had announced a new pump price of N141 per litre of petrol on January 1, 2012. However, sequel to a week-long absolute shutdown of the nation’s economy via an industrial action cum mass protests called by the labour unions, civil society organisations, and joined by the masses of the Nigerian populace last month, President Goodluck Jonathan administration following much public outcry against the unprecedented hike in petrol price, later in a nationwide broadcast to the nation, announced a downward review of petrol per litre to N97.

Nevertheless, in spite of the announcement by the Presidency to fuel marketers to effect a new price in order to cushion the biting effects of the obvious hardship on businesses, socio-economic activities and Nigerians as a whole and obvious compliance with the presidential directive in many places, high prices of goods and services earlier triggered by the N141 per litre, have remained unchanged in several places across the country ever since then.

Further still, SMEs in their thousands, apart from individual Nigerians who are equally feeling the heat, are currently finding it heavy-going in coping with the stifling inflationary trend in the system. Indeed, recent checks have revealed that compelling factors such as comparatively high costs of transportation to and from workplaces, poor electricity supply and ever soaring cost of living have induced some to close shop for a while, open for daily business haphazardly, or completely change ventures to be able to survive these austere times.

The current disquieting business climate, no doubt, brings to the fore certain experts’ assertion, that of the several key factors influencing the failure of SMEs in developing economies like ours, a combination of inflationary trend, unstable power supply and supporting infrastructure constitutes the biggest headache to the survival of this class of businesses in an economy as Nigeria’s.

It is disturbing to note, therefore, that because of persistent poor electricity supply to homes and offices, inability of many to fuel their alternative power generators efficiently and increasing operating cost, most SMEs including business centre and cybercafé operators, cottage industries, professional service firms, and artisans, including welders, panel beaters, motor mechanics, tailors, hairdressers, frozen foods sellers are all complaining loudly about the possibility of their continued stay in business.

According to EconomicWatch’s latest economic statistics and indicators on Nigeria, which were computed, updated and publicised on its website, Nigeria’s Gross Domestic Product (GDP) was $369.8billion, while the real growth rate in the economy was 6.8% respectively in 2010. Incidentally, aside from crude oil earnings said to be constituting about 90 per cent of the total revenue accruable to the economy, the Nigerian SMEs, despite operating fundamentally, in an inclement business environment induced by a number of discouraging factors over time, have struggled to thrive and contribute meaningfully to the nation’s GDP growth and overall socio-economic development of the nation.

Emphasising the indispensability of SMEs in a nation’s economy in her address at the “Getting Nigerian Businesses Online” (GNBO) Initiative event, in Lagos, December 2011, Mrs. Omobola Johnson, Honourable Minister for Communications Technology, declared that “SMEs have been widely acknowledged as being the most viable vehicle sustaining industrial development because they possess the capacity to promote an indigenous enterprise culture.”

Globally, according Johnson, small and medium enterprises provide 50 per cent of worldwide employment, just as 90 per cent of registered businesses are SMEs. In Nigeria, she disclosed further, 70 per cent of the nation’s employment opportunities are provided by SMEs, but that these SMEs “deliver only 10% economic value-added (EVA- a proxy of GDP contribution), compared to an average of 55% and 25% EVA in other developing economies and 60% and 50% respectively in developed economies.”

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But why? She attributed the comparatively low contribution of the sub-sector to poor infrastructure, a poor skills base, access to finance, low adoption of ICT and access to markets among others. That is why the real costs of these discouraging factors have been influential on several Nigerian SME operators in an economy continuously contending with infrastructural deficit for decades.

Thus, in assisting the nation’s SMEs, most of which currently struggle endlessly to survive and thrive in the choking economic climate, the government in partnership with the Organised Private Sector (OPS) can bail these businessmen and women out through the provision of supporting infrastructure such as good road and rail networks, stable electricity supply, SME-friendly regulations to enable them access needed funds to enhance business growth and provide more sustainable opportunities for wealth creation.

The promised palliative programmes and projects outlined in the Federal Government’s Subsidy Reinvestment and Empowerment (SURE) Action Plan should be implemented to the letter, at least for SMEs to boost their all-important contributions to the nation’s economic growth and development.

With the growing inflation making daily living tedious for millions of the citizenry addressed decisively, while boosting the standard of living of the average Nigerian, SMEs will as well be encouraged to increase their productive capacity to churn out more quality goods and improved services in order to jack up economic activities in the nation’s system.

It should be restated that SMEs yet remain the plank and strategy upon which robust economic development that can enhance employment generation, food security, poverty alleviation, rapid industrialisation, and discouragement of rural-urban migration can be accomplished.

Failure by all the stakeholders to assist scores of these SMEs through an enabling environment to overcome some of these limiting factors and flourish, aside from making the society lose a veritable means of production and distribution of goods and services, the government also will lose revenues it will have earned from tax, just as the standard of living of many will remain abysmally low.

More so, if SMEs are not given the proverbial “breath of fresh air” to actually drive its economic programmes and projects, the current administration’s desires of achieving marked progress on the fundamentals of hitting the Millennium Development Goals (MDGs) by 2015 and much-publicised Vision 20: 2020 may well be tantamount to building castles in the air.


•Kayode, a media and communication professional, writes from Lagos. E-mail: [email protected]

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