BusinessDay

How Nigeria’s cost of doing business crisis affects MSMEs

Africa’s biggest economy is facing a fresh cost of doing business crisis as energy prices and production costs make rapid climbs.

Nigeria’s inflation has accelerated to 20.5 percent in August, the highest in 17 years, according to the National Bureau of Statistics (NBS). This is set to go even higher if the government fails to act on soaring food, and diesel prices, analysts say.

To gauge the economic impact of the country’s fresh cost of doing business crisis, BusinessDay spoke to some operators of micro small and medium scale enterprises (MSMEs) across major cities.

Oluwalobamise Orafidiya

Orafidiya is the founder of CreativiTees, a start-up operating in the fashion industry.

How are you coping with the rising input prices?

It is not really easy because product prices cannot be changed too often for the sake of uniformity. So this affects the profit on my end.

Are customers buying your products?

Yes, customers buy my products. As a growing business I have sold about 50 CreativiTees and I am very proud of this feat. I am connected to a number of Creatives who love and patronise my brand. Asides sales of my original brand designs, I also make custom designs for customers who request for it.

How is the worsening power supply affecting your cost of production?

Without mincing words, it is affecting business badly. The fluctuating status of power keeps increasing the cost of branding. The lack of power coupled with the high price of diesel makes production much more expensive.

What strategy did you adopt as a business to survive the COVID-19 pandemic?

My business is quite new. It started towards the end of 2020, September to be precise. By this time, the lockdowns had eased, but the effect of the pandemic was definitely still there.

Ugah Chukwuemeka

Chukwuemeka is the executive director of Legacy Building Solutions – a supplier of aluminium composite panels, operating in Ibadan, Oyo State.

How are you coping with the rising input prices?

The current cost of doing business is as difficult as starting up. Last year, our suppliers increased their prices four times. It created some strain on our finances and reduced our profit margin since we have to add up money to repurchase. In order to manage these regular price increases, we are more vigilant in the market, follow economic trends and effect a price increase when necessary.

Are you making more money compared to before?

Compared to last year, we are making about 40 percent less profit per good.

Are customers buying your products?

At the moment, customers still patronise us, but they understand that the situation is general.

How is the worsening power supply affecting your cost of production?

Our business does not really rely on power because we supply aluminium composite panels.

What strategy did you adopt as a business to survive the COVID-19 pandemic?

We dealt majorly in supplies and had to keep a good rapport with our suppliers and the logistics company. Construction works were still ongoing, therefore, customers needed goods.

Is the Nigerian business environment improving?

The Nigerian business environment is worsening because many start-ups from 2020 have not been able to survive. One would need strong capital with a good business strategy to cope now.

Adelaide Adesote

Adesote is the founder of Suwacloset- a fashionable online eyewear store operating on Instagram and WhatsApp.

How are you coping with the rising input prices?

The persistent fall in the value of naira compared with the dollar has affected so many businesses, including mine. Sometimes even the profit gotten from sales might not be enough to restock, so there is a need to increase the price of goods. Yesterday’s price is not today’s price; everything keeps adjusting day in and day out.

Are you making more money compared to before?

For a business that started less than six months ago, the cash inflow is fair. I am still in the process of getting people familiar with my brand but so far it’s been fair.

Are customers buying your products?

Yes, customers buy my products. One person’s preference might not be another person’s. But then, customers still come around. I reach these customers by speaking to people about my business, running ads and basically showing up for my business every day.

How is the worsening power supply affecting your cost of production?

To be honest, the worsening power supply has very little effect on my business at the moment.

What strategy did you adopt as a business to survive the COVID-19 pandemic?

My business was not yet in existence during the Covid-19 pandemic. If it were, I’d say my strategy would have been to use social media more.

During the COVID -19 pandemic, social media became very significant as everyone had to use it for one thing or the other.

The best way to reach anyone during the pandemic was through social media as everyone had to be active for work purposes, entertainment, communication, and even basic household items.

Is the Nigerian business environment improving?

As much as entrepreneurs are putting in efforts and showing up for their businesses, the Nigerian economy has made it really tasking. Some business owners end up incurring losses, debts etc. So I’ll say that I expect the Nigerian business environment to be improving because entrepreneurs keep putting in the necessary work for business growth regardless of the present economy. Nigerians know how to adjust to any kind of situation they find themselves and the same is playing out in the Nigerian business environment.

Read also: Likely slowdown in inflation ahead, but how many small businesses will survive?

Lilian Chinwendu Managwu

Managwu is the founder of Luxurybycl. She sells non-tarnish, hypoallergenic female jewellery online via Instagram.

How are you coping with the rising input prices?

An increase in the cost of production is such an issue for every business owner and it is resulting in the closure of a lot of businesses. To cope with these issues and sustain my business, I ensure that I keep a proper record of what comes in and goes out. I make sure that all business funds are properly accounted for so that I don’t run at a loss. In terms of customer retention, I run some discounts and try to maintain a steady price range for my products, this may involve cutting down a little on the profit margin. However, despite doing this, I still ensure that I make a reasonable profit on each item. This is why I take business records very seriously; it is the metric that allows me to calculate the best ways to go about it in order to not run at a disadvantage.

Are you making more money compared to before?

My business is a fairly new business. I have been running it for a year and about two months. If I have to compare the profit margin I make on each product now to what I initially made from the first set of goods, I will say I am not making much. This is because of the increasing costs of operation and increase in import fees and the general state of the economy. I cut down a bit on the profit margin to enable me to still sustain a good price range in order to retain customers.

Are customers buying your products?

Sales have been quite slow. I market on my various social media platforms but the turn-up has not been as much as I would hope, but at the stage that I am now, I would say that my business is gradually gaining traction. I have shipped outside of Nigeria to countries such as the USA, the United Kingdom and Ghana. I’m still very optimistic about my business potential and I know that with time and implementation of strategies that I have learnt along the way and also with more exposure such as a feature on your platform, my brand would definitely begin to make its mark and the buying audience would increase.

How is the worsening power supply affecting your cost of production?

I would say that the major area that power supply affects my business is in terms of content creation. I use a ring light to shoot content and as a result, this is limited to when there is power supply because the ring light works with electricity. Also, as an online business, my gadgets are very important to the running of my business and as such the worsening power supply affects the smooth running of my devices as my battery might get low while creating content or checking in on my page and my business.

What strategy did you adopt as a business to survive the covid-19 pandemic?

I started my business in 2021 and as such, I was not directly affected by the COVID-19 pandemic.

Is the Nigerian business environment improving?

In my opinion, I would say no. But Nigerians as a people are very talented. Nigerians as creative entrepreneurs are really taking bold steps and making bold moves in terms of the ideas and innovations that people come up with. It is really refreshing to see the level of creativity Nigerians have. However, a lot of this is strangled by the poor state of our economy and the lack of support from the government. The economy makes it difficult and frustrates scaling. There are not a lot of resources available to small business owners compared to other countries and this is really eating into the business environment and the entrepreneurship space. Also, government policies are not helping; it’s almost as if the government is trying to frustrate people out of business with some guidelines and this is killing businesses.

It is really not encouraging, especially to new entrepreneurs who are just beginning or are considering starting their entrepreneurial journey.

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