In combination with foreign exchange and credit crunch, rising prices are pushing millions of small businesses to the brink, with many now unable to continue operations.
In the last two weeks in Lagos, Nigeria’s commercial nerve centre, at least two micro business owners have told BusinessDay about their plans to shut down and move into paid employment due to a continued surge in input prices and other challenges.
BusinessDay interviewed some operators of small and medium businesses like Arinola Okeowo, chief executive officer at Ultra Farms, and Omowumi Afolashade, head baker at The SweetTreat Paradise to share how they are coping with the situation.
Excerpts:
How are you coping with the rising input costs?
Okeowo: The hike has been crazy, but we have to keep developing means to cut costs by doing joint farming or conjoined farming. For example, it is more cost-efficient for a tractor to clear an acre as compared to just two plots. This way, we incur costs as a group at stated discounts which we wouldn’t have had access to individually.
Afolashade: It is tiring and discouraging, even clients have a budget and tend to not exceed their budgets thereby turning us down, if we decide to do it cheaper then we run at a loss.
Are you making more money compared to before?
Okeowo: No we are not. There has been a 300 percent increase in the cost of fertilisers, especially due to the Russia-Ukraine war. Also, there has been a hike in the prices of farm inputs like seeds stemming from the continued fall of the naira against the dollar in the exchange market. Currently, fertiliser, NPK, and urea are scarce asides from being expensive.
Read also: Rising food, fuel prices may drive additional 1m Nigerians into poverty by year end; World Bank
Afolashade: No! Most times I just do it so it won’t look like the business is packed up. Most times there’s profit and most times there’s not
How is power supply affecting your cost of production?
Okeowo: Not encouraging. I think every business owner in Nigeria is facing this particular problem. Especially for those of us that deal in perishable and processed foods. About two months ago, I lost over 15kg of strawberries due to an epileptic power supply and I had to stop stocking them even though customers won’t stop asking. Production is currently double the normal cost, no thanks to the poor power supply.
Afolashade: It’s affecting the cost of production and even storage.
What strategy did you adopt to survive the Covid-19 pandemic?
Afolashade: Well, when there were no demands for cake/ice cream for parties except for those that wanted to satisfy cravings actually, we developed a menu that satisfies only families or individuals.
Okeowo: If there was one thing that the pandemic has taught us, it is to adapt to situations and make the most of them. We adopted going digital, and we didn’t regret it. Cheers to making lemonade out of lemons.
Is the Nigerian business environment improving?
Okeowo: From a personal point of view, I’ll say yes even though not at the expected pace with the main setbacks being government policies, the lack of basic amenities, poor access to loan facilities, and inadequate funding.
Are people buying your products?
Okeowo: Regardless of the price increase, people need food to survive so yes, we make sales because food is a necessity.
Afolashade: A couple of retiring customers still buy from us but we turn down some that are not profitable.
Nigerian small businesses squeezed by rising food prices
