Small scale entrepreneurs groan under harsh operating environment

…Credits from banks drying up amid rising cost of production, labour, rent

Since the sealing of his warehouse at Ogbor Hill and two landed properties across Aba, in Abia State last year, over failure to repay loan, Francis Ezeokoye has not recovered.

The entrepreneur obtained the loan in 2022 to scale up his sachet water production to bottle and plastic manufacturing, but the harsh economic realities and stiff competition out there crumbled the expansion plan.

“My low-scale sachet water production was thriving, but the competition was becoming stiffer and in response I obtained N150,000 million loan from my bank of 25 years, but couldn’t repay on schedule,” Ezeokoye, who now lives in the only house he did not use as collateral for the loan, lamented.

The Aguata, Anambra State-born entrepreneur, who started life as an insurance agent in Lagos, blamed his misfortune on the impact of the economic reforms, and inflation that induced high cost of production, price hikes and low purchasing power.

While his factory is sealed, about 25 staff members, including two relatives, are still living from hand to mouth as jobs are not easy to find these days.

Hassana Umoru, a dairy product processor, has similar experience. Umoru, whose small-scale dairy company supplies yoghurts and ice cream to some supermarkets in Lagos and Ogun States, was forced to almost close shop when the cost of production outweighed the profit.

“My biggest challenge was our migration to Band A electricity tariff. We have 12 big deep freezers that are gulping power and powering them with our two generators means more diesel, which is very expensive,” she lamented.

Her big challenge was that she has had three consecutive price increments in a short time, which her clients were complaining about, and further increment might force them to look elsewhere.

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“One of the supermarket supervisors told me that because of the hardship, many are struggling to eat, and that ice cream and yoghurts are luxury items for many now. I think it is true because they are expensive because of the ingredients we use, preservation and packaging,” she said.

While groaning over the harsh operating environment did not help, and instead of running to the banks for loans, she made some bold decisions that shrunk her business, but also kept it afloat today.

“I use Access Bank and they keep calling me for loans, but I want my peace. So, in late 2024, we moved from our Ikeja office, which is on Band A to somewhere in Oshodi, which is on Band C, we use 5 deep freezers now instead of 12. But I also had to downsize from 18 workers to 10 and also cut down the delivery’s days. We are managing our power better now, and I don’t think I will scale up anytime soon because the cost of production is still high, transportation has gone up again, more taxes to pay and workers are insisting on a pay rise every day,” she noted.

According to her, small-scale businesses are barely surviving these days due to the inflation and the economic hardship that have eroded purchasing power of many, while the many policies of the government are compounding the woes of small-scale businesses.

“Imagine ice cream and yoghurt becoming luxury items. It tells you how poor many have become lately and the government keeps shouting things are working, probably, only in their affluent homes,” she decried.

In Port Harcourt, two private schools recently merged as each barely has enough pupils and students to run sustainably.

While the above sounds like a survival tactic, last year, a big private school in an estate in Oke-Afa, Isolo, Lagos, changed its name, and ownership.

The former owner, who is also a resident at the estate, explained to the estate community that he was just answering big names with little to show for it, hence he sold to a bigger school with financial muscle to face the toxic business environment.

“Schools are businesses too. Parents want modern facilities, world-class teaching aids, good buses, safe environment and well-motivated teachers. But that requires good fundings, which is often not there and going to the banks always puts the school under stress of increasing tuition fees to repay loans.

“So, those who cannot afford the stress remain small or close down. There is no sentiment about it, school is business and the harsh realities out there are affecting it too,” Agnes Onche, a retired director in the Ministry of Education and a school proprietress, said.

For Imolayo Alimi, founder of a garment factory, more small-scale businesses have collapsed in the last five years in Nigeria due to the harsh business environment and realities on ground.

According to her, high interest rates, the escalating rent, increasing electricity tariff amid epileptic supply of power, the high cost of raw materials, high diesel and other inputs are breaking the back of many entrepreneurs like her.

“Ours is a professional garment factory that produces uniforms for schools, security outfits and corporate organisations. But business is not thriving like before because most of our clients are improvising now due to the high cost of engaging us,” Alimi said.

“Most of the fabrics we use are imported and you know how the exchange is going. We import our sewing machines too, and other design and finishing aids, we pay for high electricity tariff, office rent has tripled in the last two years from N750,000 to almost N3 million and the taxes are increasing with the government agents coming everyday with one new thing to pay”.

Her worry is that all the expenses are passed on to the clients, who have been complaining lately.

“Going to the bank for any form of credit facility is out of it for now because business is tough and we are struggling daily to survive the harsh environment. We are staying low and building from there because there is no help anywhere,” she noted.

Considering the harsh economy, inflation, which is still high and the attendant low purchasing power, Marcel Eletubo, a member of the Manufacturers Association of Nigeria (MAN), argued that at almost 30 percent interest rate charged by banks on loans, only a few entrepreneurs can repay loans.

According to him, despite the high interest rates, banks are no longer giving credit facilities like before and businesses that need lifeline will die hoping on banks.

But most small-scale entrepreneurs are worried that the dividends of the reforms are taking longer to impact their businesses as some are still collapsing under the weight of the hardship.

“Since May 29, 2023, we have been asked to support the reforms, we did with the hope that it will recalibrate and fix structural distortions in the economy as promised. But things are getting worse, inflation is still biting, jobs are not there, no money to patronize our businesses, people are getting poorer and we are still being told that things are working, our business is collapsing under multiple taxation,” Eletubo said.

It would be recalled that the International Monetary Fund (IMF) sometime in October 2024, urged the Nigerian government to bring human face to its reforms by directing savings from the fuel subsidy removal into providing a safety net for the poor and vulnerable population in the society.

Many think that the government did not heed to that advice, considering that the reforms have impoverished many Nigerians, reducing them to live only on hope for a better tomorrow.

But President Bola Tinubu countered the above, insisting that Nigeria is out of the woods, and that better days are ahead.

Speaking at an interfaith breaking of fast with governors last month, at the State House Banquet Hall, Abuja, President Tinubu declared that the country has emerged from its economic and security challenges, hence is “out of the woods”.

Many, especially small-scale entrepreneurs still argue over the context of the declarations as realities on ground differ, with the struggle for survival continuing, regime of hikes back, production cost soaring, new tax regime in place and purchasing power still very low.