Small business must optimize to survive (1)

The Nigerian economic environment has always been challenging. It is even more so at this time of change, especially for small businesses. Even young entrepreneurs launching into business now recognize that little or no anchors exist out there upon which to hinge their dreams. Thus, they must be schooled, from incubation, to be smart and proficient in the effective use of limited resources. The present times call for the deployment of the full arsenal of management skills and natural (native) intelligence among our micro, small and medium enterprises (MSMEs), if they are to stay afloat till the change we expect happens.

Nigeria is presently going through a change process, which will hopefully make it a safer and better place for future generations of all Nigerians. The expectation is that at the end of it all, we shall have a better country in which things that work elsewhere would also work. We shall have a civil service that is respected for its competence and not one derided for allowing official fraud and mismanagement. We shall have a crop of political leaders whose loyalty is to Nigeria and not their tribes. We shall also have the basic infrastructure taken for granted in less endowed climes but necessary for growth. In effect, we shall have an environment in which small entrepreneurs could conveniently hatch their dreams and make a success of them.

President Buhari has often asked Nigerians to be patient with him, and I believe Nigerians are doing that effectively. They know that this administration did not cause all the problems it is trying to solve. But speaking during the week, his Senior Special Assistant on Media, Garba Shehu, told Nigerians, in the fashion of a school teacher to his pupils that “change does not happen overnight”. Many Nigerian think he was impolite. They say that the president’s request for patience was more respectful to Nigerians than any “lecture” on how long it takes for change to happen. I believe this government will not approve of comments that echo arrogance and impunity. Some Nigerians are of the view that such statements give indication of how some leaders erroneously think so lowly of the Nigerian people.

The point is that public officers should not disrespect the people who pay their bills. There is a better and more respectful way to speak in the public space. An effective change programme must be precise on deliverables. This is important because change has components and every component must be clearly identified, separated and targeted for execution. The entire change programme must therefore be proficient on time-targeting, such that every deliverable is clearly time-targeted and resolved. This is important because it shows critics that the room is not quiet and for purposes of evaluation and accountability, without which no change can happen. I think taken as a group the present crop of functionaries should be able to deliver change to Nigeria.

Be that as it may, the SME business community must not sit aloof and wait for change. It must embrace change by preparing for change. The question we must ask in this community, therefore, is: what should small businesses do to survive while change proceeds, and how would it benefit from the expected change? It is hoped that our understanding of change is not merely political. It is all encompassing – political-social and economic.

The Nigerian economy is currently in a recession, however conceived – mild or deep. It is recording some of its poorest growth numbers of recent memory. At 2.79 per cent in 2015, the Gross Domestic Product (GDP) fell below the average growth rate for Sub-Saharan Africa. Not only is this an abysmal performance, given Nigeria’s endowments, it is also the first time the country is recording such a low GDP growth out-turn in several years. This poor performance is due to a number of internal and external factors. For one, poor policy choices, including inadequate funding of capital projects and rampant sectoral leadership failures, have joined forces with a disastrous collapse of oil prices to wreak havoc on the economy. Between 2014 and 2015 alone, Nigeria’s crude oil export earnings declined by about 42 percent as exports slowed. And the fall in oil prices was not the only negative experience in the period as non-oil exports also declined by about 37 per cent.

The current exchange rate regime is at best unclear and at worst against the national interest. The various stop-gap measures adopted by the Central Bank have remained what they are – a stop gap – and have not produced any lasting effect. The gap between the official and parallel market rates remains wide, gaping and growing. This has devastated many small businesses, which have now resorted fully to the parallel market for sourcing their foreign exchange. This means that the effective exchange rate in Nigeria today is the parallel market rate. Even market women selling vegetables now make reference to the dollar rate to justify their higher prices.

For SMEs, it is time to rethink strategies for survival. One of the first things I think they should do is to use this low time to consolidate on some housekeeping defects, so as to be ready to run with change as it hopefully unfolds. There is need to improve on internal record-keeping. Without embarking on any major expenditure, SMEs could improve their capacity for record-keeping, by putting competent people in charge of their records. This may not involve hiring new staff. Reorganization may reveal the existence of competent staff in the wrong places to be redeployed. Besides, a lean team with the right competencies is better than a horde of men who end up costing more.

This kind of house-keeping is not only good internally, it is also good externally. SMEs must make themselves, not just their transactions, bankable. They must work to qualify for bank support, which is essential for growth. To prepare for bank funding, an enterprise must be committed to good record-keeping. Banks like records from those they support. SMEs must also be committed to the business of banking. Most SMEs still keep much of their cash outside the bank. This conduct not only limits their ranking and stature in the banks but also exposes them to the risk of loss. All monies must be banked and used to negotiate terms of the relationship. Banks rank clients according to the level of business they bring. And it is better to start by consolidating your business in one or at most two banks, to earn the respect of your bank.

In some cultures, not being indebted to anybody is a virtue and thing of pride. It has a twin brother in “my wife cannot work for anybody. She is better off staying at home and raising my kids”. Such are the cultures that we need to shed. The days of doing business solely with one’s own money are gone, and keeping one’s wife out of work as a thing of pride is also archaic. The ability to attract and use other people’s money to run one’s business is the new way to go and the contribution of women to the family fortune can no longer be down-played. SMEs bring themselves to the culture of modern business, which includes being really smart with both internal and external packaging.

Emeka Osuji