It’s been one month since President Bola Tinubu pledged to energise the Micro, Small and Medium Enterprises (MSME) and the manufacturing sector to cushion the impacts of petrol subsidy removal and naira devaluation.
But so far, businesses in Africa’s biggest economy have said they are yet to see any evidence of the funds. They are yet to know the criteria for disbursement, the requirements, terms and conditions, prospects and the agencies that will disburse the funds.
In recent months, rising inflationary pressures have weakened the purchasing power of cash-strapped consumers, while businesses grapple with higher operating costs. This has forced many small businesses to close shop.
“What we just have is the announcement and nothing beyond that. There is no evidence that the funds have been released to the implementing agencies for the N125 billion for the MSMEs and the N75 billion for manufacturers,” Gabriel Idahosa, deputy president of Lagos Chamber of Commerce and Industry (LCCI), said.
He said when the president made the announcement, the chamber advised that the implementation of intervention funds should be done very fast but that has not happened.
“If the money was released in June, for the whole of July, the implementing agencies would have rolled out the processes on how to apply and the conditions for it. And by the beginning of August, most businesses should have been able to access those funds,” he added.
Femi Egbesola, national president of the Association of Small Business Owners of Nigeria (ASBON), said the only information they have got about the fund is the pronouncement from the presidency.
“So far, there has been no directive, about the terms and conditions, requirements, applications and screening towards accessing the funds. We have not seen the first batch of beneficiaries of the funds,” he said.
“And even before the pronouncement was made, there were no prior consultations with us to know or get justifiable criteria that will be equitable for businesses. I am just confused because this is not the way things should be done.”
During a national broadcast on July 31, 2023, Tinubu said his government would energise the MSME sector with N125 billion as part of measures to cushion the impacts of petrol subsidy removal.
He said his government will spend N50 billion on Conditional Grant to one million nano businesses between now and March 2024.
“Our target is to give N50,000 each to 1,300 nano business owners in each of the 774 local governments across the country,” he said.
He said this programme will further drive financial inclusion by onboarding beneficiaries into the formal banking system.
“In like manner, we will fund 100,000 MSMEs and start-ups with N75 billion. Under this scheme, each enterprise promoter will be able to get between N500,000 to N1 million at 9 percent interest per annum and a repayment period of 36 months,” he added.
According to the president, N75 billion will be spent between July 2023 and March 2024 to strengthen the manufacturing sector and increase its capacity to expand and create good paying jobs.
“Our objective is to fund 75 enterprises with great potential to kick-start a sustainable economic growth, accelerate structural transformation and improve productivity. Each of the 75 manufacturing enterprises will be able to access N1 billion credit at nine percent per annum with maximum of 60 months repayment for long-term loans and 12 months for working capital,” he said.
Segun Kuti-George, national vice president of the Nigerian Association of Small Scale Industrialists, said the government could be working on the modalities for the implementation but at least business organisations should know where the money is, who is going to be in charge of it and who will distribute it.
“A lot can happen in one month. If nothing is done, many businesses could shut down. But if there is a lifeline the story will be different,” he said.
Since May 29, when President Bola Tinubu announced the removal of the petrol subsidy, petrol price has tripled to N617 from N184, while the value of the naira has plunged following the floating of the currency.
The floating of the currency has increased the official rate from N463.38/$ to N 738.18/$ as of Tuesday. The gap between the official and black market expanded to N187.
According to the National Bureau of Statistics, the inflation rate rose to a near 18-year high of 24.08 percent in July 2023 from 22.41 percent in the previous month.
The latest Purchasing Managers’ Index by Stanbic IBTC Bank shows that business activities in the country dropped to 51.7 in July, the lowest in four months, from 53.2 in the previous month.
“Rising price pressures impacted demand, with growth of both new orders and business activity softening as the second half of the year got underway,” analysts at Stanbic IBTC Bank said.
Data from the Nigerian Exchange Limited shows that foreign investment in Nigerian stocks fell last month to its lowest level since Tinubu’s reforms that sparked a massive rally in the equities market.
The total amount of stocks bought by foreign investors plunged to N9.45 billion from N22.72 billion in June
Abdulrasid Yarima, president/chairman of the governing council of the Nigerian Association of Small and Medium Enterprises (NASME), said members of his association are concerned as they are yet to hear from the federal government because the number of MSMEs closing shop is increasing.
“Just like everybody else, we had the expectations that the interventions would start immediately. We have even requested for a consultation visit to interact with the new minister but she is yet to respond.
“We did the same to the vice president who is the chairman of the MSME council but since June, he has yet to respond,” he added.
Temitope Ajayi, senior special assistant to the president on media and public affairs, while speaking with BusinessDay on the delay, called for patience, adding that the president is mindful of his promises to Nigerians.
“As you are aware, the ministers just assumed office barely a week ago especially Wale Edun, the minister of finance and coordinating minister of the economy and Doris Anite-Uzoka, his industry, trade and investment counterpart, who will drive these programs as they affect the manufacturing sector, small and medium scale businesses,” he said.
He said the two ministers were working out the modalities for implementing these policies to ensure that all Nigerians benefit from the program and that no one is left out.
BusinessDay reported in July that small businesses were shutting down as a result of the surge in petrol prices occasioned by the subsidy removal and the naira devaluation.
According to NASME, about 10 percent of the 40 million MSMEs in the country have shut down since the subsidy removal. ASBON projected that more than 20 percent of their 27,000 members have been affected by the mounting economic woes.
“When you make such announcements, you create anxiety and expectations among businesses because over the last three years, most of them have lost a lot as a result of the Covid-19 pandemic, elections, naira crunch, the petrol subsidy removal and naira devaluation,” an official at MAN said.
He advised that investors should be patient and lower their expectations for a short period of time. “The government and ministers should also begin to create the criteria on who will get the funds, conditions and the percentage because if it is not well managed, it may be hijacked by the political class.”
The MSME sector is important to market economies as it acts as the wheel of the economic growth of any country. By creating new products and services, they stimulate new employment, which ultimately results in the acceleration of economic development.
In Africa’s most populous nation, the sector contributes 50 percent of the GDP and has provided over 48 percent of all employment opportunities in the country, according to the United Nations Industrial Development Organisation.
But small business operators in Nigeria have been grappling with a combination of issues, including poor power supply, rising borrowing costs, soaring inflation, restrictive economic policies, foreign exchange volatility, and tax multiplicity.
According to the Small and Medium Scale Enterprises Development Agency of Nigeria in Nigeria, 80 percent of SMEs fail before their fifth anniversary due to harsh economic environments, lack of access to capital, and poor business practices, which have stunted the growth and transition of micro-businesses.