Africa’s biggest economy is facing a fresh cost of doing business crisis as energy prices and production costs continue to make a rapid climb.
The situation is negatively affecting the operations of businesses with micro and small businesses worst hit by the impact.
Nigeria’s inflation has accelerated to 21.09 percent in October, according to the National Bureau of Statistics, with it set to go even higher if the Nigerian government fails to act on soaring food and fuel scarcity as queues resurface in Lagos, analysts say.
To gauge the economic impact of the country’s cost of living crisis, BusinessDay spoke to some operators of small businesses and here are their responses:
Olajumoke Adunni Agoro
Agoro is the founder of Dunnispot Catering Services – a food vendor in the Lagos metropolitan.
How are you coping with the rising input prices?
Understanding my customers and investing in market research were two of the many tools I used to survive this rising input cost. I went into the marketplace myself to talk to customers directly to understand their pain points and how their attitudes and behaviours in response to price inflation. I realised more customers were looking out for promotions and discounted sales on certain meals, so I cut prices not across the board but only on meals selected as inflation-busters. For low-income customers, promotions hit key price points on small pack sizes while high-income customers encourage multi-unit purchases ahead of inevitable next price increases.
Are you making more money compared to before?
To be factual, I am not making more money now because the standard of living for an average Nigerian today’s high and most people work on budgets. Thankfully, as a food vendor, food is an essential most people can’t do without so I have been able to still cash out.
Are people buying your products?
Yes, I have customers patronizing my brand, as I put my brand out there on almost all social media platforms so I have new customers, lots of referrals, and my loyalist that has taken us where we are today.
How is the worsening power supply affecting your cost of production?
The lack of a working grid has led to high financial costs. When businesses such as mine add up the hidden expenses – generators depreciation, maintenance, and personnel cost, it can be discouraging but alternative sources of electricity such as inverters and generation have helped my brand in the preservation of my perishable products.
What strategy did you adopt to survive the pandemic?
During the covid-19 pandemic, my business thrived via social media, D.I.Y videos to my loyal customers on request, and home deliveries. It was one of the most profitable periods for my brand.
Is the Nigerian business environment improving?
Yes, it is, as there are many avenues through which brands can showcase their various skills and products and equally cash out at the same.
Adewumi Adesina
Adesina Adewunmi is co-founder of Trade Lenda
How are you coping with the rising input prices?
The rising cost of input has an indirect impact on us, especially on our customers. We have seen an increase in the cost of production of various products which our customers we finance produce or sell. This invariably has led to a decline in their profit margins and most are struggling with the ability to cover overheads.
Are you making more money compared to before?
As a business, we have seen an increase in turnover as we continue to finance supplies for our customers and vendors. However, there is no significant margin increase as that can cripple the small businesses we support within our network.
Are people buying your products?
Access to finance remains very key at this time, thus anyone that offers accessible credit opportunities opens up huge pipelines for people to explore. This is what we do at Trade Lenda, making finance available within the Supply value chain and as such the daily request has been overwhelming. You can trace this obviously to the spike in prices of cost of production materials and products in the market.
Read also: Nigerians turn to sports betting, loans as cost of living crisis worsens
How is the worsening power supply affecting your cost of production?
Infrastructure deficiency produces lots of direct and indirect ripple effects. The worsening power supply amidst high inflation leads to an increased cost of production. Just to give an example of a transaction we recently financed, the cost of inputs increased by 50 percent within a space of one week.
What strategy did you adopt to survive the pandemic?
As business owners, our ability to listen to market opportunities and pivot is key to business success. At the peak of the pandemic, we adapted our business solution to meet market needs. This has today been an integral part of our retail and finance solution. We equally had to make some adjustments in terms of non-essential overheads
Is the Nigerian business environment improving?
The Nigerian business environment is growing although far from her potential. Until we get to the level where businesses have the needed infrastructure and support systems, we may never reach our full potential. Despite the lapses, we have however increased in FDIs in the business space across all sectors, especially technology.
The regulators and policymakers need to continue to overhaul existing systems to ensure ease of doing business in Nigeria is improved.
