SMEs struggle to survive as one in 10 pays higher than N100,000

Every morning, Jennifer Martins rises before dawn to prepare a cooler of rice and a large pot of beans, as well as yams and an assortment of other staple foods to reheat and present to customers in large gatherings in form of catering services.

Before the coronavirus pandemic, her employer paid her N135,000 for her exhaustive services, she said.

But this year, she’s fallen deeper and deeper into the red thanks to a 35 percent reduction in remunerations as her manager narrates woes of a tough time for the small and medium-sized firms that account for 96.9 percent of businesses in Nigeria and 87.9 percent of jobs.

Martins often think of quitting her job as a catering professional. But there are few prospects for her in Africa’s largest economy.

She has a justifiable fear that more of her fellow graduates will continue to fall into poverty, and remain trapped in it, perhaps for more generations, perpetuating a vicious cycle of poverty.

A new survey published by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in collaboration with the National Bureau of Statistics (NBS) substantiates her fears with a detailed ledger of small businesses performances in Africa’s most populous nation.

For instance, the survey showed 1 percent paid between N50,000 and N100,000 while 1.9 percent paid above N100,000 and about 94 percent of micro-enterprises paid their staff below N50,000 as wages and salary for both 2019 and 2020.

“Before the COVID we get informal jobs within the range of N115,000 or N145,000, depending on the location and types of job. Now we struggle to see informal jobs of N70,000. It’s only the formal institutions that pay more,” says Tunde Ademola, an operating officer with Page Financials, a fintech startup company in Lagos.

This development has made it an employer’s market, leaving workers virtually powerless to negotiate let alone demand better terms.

In Martins and her cohort case, that means putting 10-hour days leaves her little time to even explore the few opportunities that may be available to her.

”The challenge is that you barely have the time to go search for a job elsewhere,” she told BusinessDay.

Under-employment has been a feature of Nigeria’s labour market for decades, but it is especially rife in the informal sectors.

“We have more enterprises in the informal sector because of the ease of entry and exit, low capital requirement, ability to raise loans from family and friends, and not having to deal with formal regulatory authorities,” the immediate past director-general of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said.

Nigeria’s official unemployment rate rocketed to 33.3 percent, meaning 23 million Nigerians are unemployed, the equivalent of the population of the Netherlands and Singapore combined.

Over half of the country’s roughly 70 million-strong labour force was either jobless at the end of last year or not working a full-time job.

“Any discussion around structure and proper business administration is considered rocket science by many and so they take the easy way out and stay informal,” Jovita Mogeme, CEO, Pundit Bookkeeping Services

In SMEDAN and NBS findings, 64.5 percent of micro-enterprises in Nigeria have a monthly turnover of less than N50,000, while 29.4 percent have an average income of N50,000 to N300,000, and the remaining have a monthly turnover of N600,000 to N900,000.

Read also: How government policies push Nigeria’s 1.8m MSMEs to the brink

“The most unfavourable government policies that affected businesses were High Fuel Price, High Taxes, High Electricity Tariff and High-interest rate,” said the executive summary of the report, which surveyed 4,000 businesses across both formal and informal sectors of Nigeria’s economy from urban and rural areas.

“Most businesses also have to generate most infrastructures, like power to water and the likes, themselves,” said Mogeme.

Nigeria was plunged into its deepest recession in over four decades, which saw its economy shrink by 6.1 percent and 3.6 percent respectively in the final two quarters of 2020.

The country’s annual inflation rate rose to 15.63percent last December for the first time in eight months after recording a consecutive fall for that long.

Speaking to the reason for the meagre salaries paid by small enterprises, “the pay is a reflection of their sizes and scale of operation, this is perhaps the best many of them can do,” Yusuf, former LCCI’s chief t old BusinessDay.

President Muhammadu Buhari claims his regime has lifted 10 million Nigerians out of poverty, the World Bank maintains that 7 million Nigerians became poor under Buhari in 2020.

The inadequacy of job opportunities in Nigeria, noted a 2015 World Bank report, “is at the core of high poverty levels, regional inequality, and social and political unrest in Nigeria.”

Having a job is often understood as receiving a wage, enjoying a minimum standard of living, and having some access to social security such as health and pension.

Nigeria’s economy has been in a macabre freefall since 2015. Driven by a salad of extremely unsavoury fiscal policies by a government more keen on handing out petty cash as social welfare schemes to drive growth, taxing a shrinking economic base to access funds, and a widely ridiculed monetary policy regime from a Central Bank that has woefully failed to maintain financial stability in over six years, President Buhari’s administration’s incapacity to stabilise and grow the economy has left most Nigerians puzzled.

When quizzed about Nigeria’s unemployment rate, Buhari responded, “all I know is that we have to allow people access to their farms.”