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Ailing economy killing SMEs

By Maria Famakinwa

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Small scale enterprises play significant roles in the development of every country. The sector is acknowledged to have huge potential for poverty alleviation, employment generation, and wealth creation in any economy. Small scale enterprises also contribute to the country’s Gross Domestic Product (GDP). In spite of its significance, growing a small scale business in the country has remained a challenge, as some of these businesses fail within the first five years of their establishment.

In developing economies, small and medium-sized businesses are generally regarded as the engine of economic growth and equitable development. In addition to the potential for self-reliant industrialization with  local raw materials, small and medium-sized  businesses are better positioned to increase employment, ensure an even distribution of industrial development, and facilitate the expansion of non-oil exports. They equally make significant contributions to the country’s GDP earnings from exports, and the creation of employment opportunities.

However, some business experts who spoke with The Hope revealed that majority of small and medium-sized enterprises (SMEs) in Nigeria face difficulties as a result of sudden failure and a lack of information regarding  factors that may contribute to their sustainability and growth. They also blamed the challenge of small scale businesses on insufficient fund, tax policy, security, lack of access to loan, and poor infrastructure, among others. They advised that in growing an economy, small scale businesses are important components that should not be neglected.

In the submission of an Akure based economist, Mrs Ibukun Falolu, small scale industries still form a dominant part of business enterprises, particularly in developing nations which include Nigeria. She appealed to the Federal and State Governments to do everything possible to encourage the growth of SMEs in the country by making access to fund available to people.

Her words: “Small scale industries cannot survive without access to funds. Currently, the lending rate is high, which is not realistic for sustainable businesses and could discourage borrowing. Many owners of small business who want to get loan in the banks are often discouraged due high interest rate. Just imagine, within the first quarter of 2024, the interest rate had been increased twice by the apex bank which discouraged people from approaching banks. I think there should be programmes where entrepreneurs should be given seed capital in order to grow their businesses. Loans should be accessible with little interest. This will help to increase operations, expand businesses, purchase raw materials, hire more labour and meet demand, thus stimulating economic growth.”

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A civil servant, Mr Omowale Babajide, who is also a businessman, opined that for any small scale business to grow, there must be provision of basic infrastructure such as regular electricity, water, good roads and business friendly environment. “In Nigeria presently, most electricity consumers are not enjoying the services they are paying for. Irregular power supply had killed many businesses with some companies moving out of the country. No business can survive without regular electricity and this is affecting many businessmen and discouraging others who have good business ideas from venturing into business.

“I am a civil servant who is also into frozen food business which I started before being employed as a government worker, but now I am thinking of closing the business because I am making nothing from it. I spend more on  fuel to power my generator in order to preserve what I kept in the freezer from getting spoiled aside paying for the shop rentage. The same goes for others in this business. No nation can undermine the importance of regular electricity in sustaining small scale industries.

“Many who should have embraced small scale business are discouraged because of government inability to play their own part in ensuring the growth of such business. Most times, government advice the citizens to start up a business instead of searching for white collar job yet, no infrastructure. Everyone knows that for any country to survive economic crisis, electricity must be regular because most businesses need regular power supply to survive. We are appealing to government to give electricity the needed attention so that businesses in the country including small scale industries can grow.”

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Sharing a similar sentiment, a self employed, Mr Idris Adesola, said that small scale industries in the country are dying due to government tax policy. “Taxes imposed by the government have an effect on small businesses. If taxes are high, there will be a reduction in profit which may also lead to low  earnings and at the long run affect the growth of the business. Another attitude that discourage me is that the tax keep increasing despite not making enough sales.”

Adesola, who urged the government to reduce tax generally, added that small scale businesses contribute more to the growth of the economy and observed further that depriving the business to grow will lead to increase social-vices and huge rural -urban migration because people will be going to cities in search of unavailable greener pastures. “Small businesses have proven to cover the unemployment gap in the past, in this period of economic challenges confronting the country, it will be advisable if the central bank and the three tiers of government invest more in small businesses through provision of financial assistance which in turn will help the economy positively.

“Another factor preventing small scale industries from growing is insecurity. No business can grow effectively in an insecure environment. I am appealing to the Federal Government to do more in addressing the issue of insecurity across the country and ensure that there is an enabling environment for business to thrive. This will also help to bring foreign investors into the country and will create employment for job seekers,” he said.

A trader, Mr Friday Obinna, who claimed to have been in business for over 15 years blamed poor management and low entrepreneurial skill on the failure of some SMEs in the country. According to him, the two factors are like serious clog in the survival of small businesses in the country as some people who venture into businesses lack essential and required expertise in such business which lead to wrong and costly decision. He said: “Entrepreneurs often blame their failures on inadequate sales. However, the problem lies with poor marketing skills that could help promote their sales.

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Most entrepreneurs go into business without proper planning by taking a realistic view of what their strengths and weaknesses are, let alone giving careful consideration and analyzing the economic trends or business conditions in that particular sector of activity, which sometimes leads to mishandling when the business starts to expand.

“The root problem of most small businesses in Nigeria is lack of sufficient information about the business which usually pose serious threats to the business survival if they are not promptly looked into. Though, some blame irregular electricity for the failure of small scale businesses in the country which I agree but I want you to know that not all businesses need electricity to succeed just like me that deal with fairly used clothes. There are some people who deal with my type of business that still failed. Will you blame electricity for that? People should get enough understanding of the type of business they want to venture into to avoid failure. You need mentoring to succeed in any business, this is the crucial  factor some are not putting into consideration before starting any business and at the end they start giving excuses for their failure. My advice is that don’t just go into any business because people doing it are succeeding, first of all get enough education about it before to know if you can actually do it,” he warned.

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