The National President, Association of Small Business Owners of Nigeria, Dr Femi Egbesola, says micro, small and medium enterprises in the country are the worst hit by the prevailing dollar shortage and high cost of diesel.
He said while the Central Bank of Nigeria made it easier for large enterprises to access dollars from the commercial banks, MSMEs often found it difficult and were constrained to resort to parallel market.
There has been huge dollar shortage in the country, worsened by the volatility usually associated with elections and indirect primaries, in which case politicians mop up dollars from the parallel market and commercial banks.
As of Friday, information on the website of the CBN showed the official rate remained at N415.87 per dollar, but in the parallel market, dollar exchanged for between N600 and N610 as of Thursday evening.
Despite the concerns raised by economists that the arbitrage was unsustainable and was fuelling corruption, the naira has continued its free fall against the dollar in the parallel market while the Importers and Exporters window rate remained relatively stable.
In a telephone interview with our correspondent recently, Egbesola said, “Micro and small businesses are the worst hit by the dollar scarcity and high cost of diesel. While the medium and big businesses have the ability to find financial support to cushion the effect, we do not.
“The way CBN designed it; it is easier for medium and large enterprises to access dollars from the banks, so it means we have no choice but to resort to the black market for forex. That being the case, we get it at the highest rate. When we come to the same market with medium and large scale businesses that get it at a cheaper rate, we already know there is a big challenge.
“Secondly, you cannot forecast your proceeds because the rate changes. If you import raw materials to produce, the next time you are going back to get dollars, you have to add your capital to your profit to get dollars at a new price and that is killing. The implication is that many of us are closing shops because we can no longer compete favourably with the imported ones.”
On the high cost of diesel, he said many of the products coming into the country were cheaper than the ones manufactured locally because of the cost of production. He added, “That is why some of our members are closing shop, not just suspending production, but looking elsewhere to find means of livelihood. About 15 to 18 per cent of our members have either closed shop or their businesses are ailing.
“Electricity supply remains irregular, so we fall back to diesel, so we rely more on diesel and we can only buy little at a time. You cannot compare us to the bigger industries that can buy tankers of diesel at a time. With that, they get it at a better price and they can even get it on credit, to pay in instalments or at a later time.”
He called on the government to pay more attention to SMEs, being the engine of growth.
He added, “Government can’t create jobs, we are the ones creating jobs. So when we cannot survive, not to talk of making profit, how do we create jobs? Now, jobs are being lost because factories and small businesses are winding up. It’s not fair.
“Some of our members are relocating to neighbouring countries because electricity and their currency are stable while policy is also very considerate towards small businesses.”
A joint report by the National Bureau of Statistics and the Small and Medium Enterprises Development Agency of Nigeria in January indicated that there were 39,654,385 MSMEs in Nigeria as of December 2020 as against the 41,543,028 in 2017. The report said they contributed 4.5 per cent to the country’s economic output.