Small Businesses in Nigeria have listed obtaining finance, finding customers and infrastructure deficits as the most pressing problems impacting their operations in the country.
These challenges are some of the findings from the recent survey conducted by PWC Nigeria on Micro, Small and Medium scale enterprises (MSMEs) in Nigeria.
The survey report was revealed during a webinar virtual lecture hosted by the firm for MSMEs on Managing the Impact of COVID-19 and Repositioning Your Business for Growth. The report titled PwC’s MSME Survey 2020- Building to last is the first in a series of surveys that aim to provide insights into a range of issues concerning MSMEs in Nigeria, and the challenges impacting business growth, particularly financing, taxation issues; and other factors – through the eyes of their Chief Executive Officers.
The survey conducted prior to the COVID-19 Pandemic between August and December 2019 sought the opinion of 1629 key decision makers in the MSME sector surveyed with annual sales turnover ranging from N5 million and above.
The businesses surveyed had a geographical spread covering 29 states and across the 6 geopolitical zones in the country.
Presenting results of the findings Esiri Agbeyi, Partner and Lead, Private Wealth Services, PwC Nigeria noted that Obtaining finance recorded 22 per cent, Finding customers 16 per cent and Infrastructure deficits 15 per cent were identified by respondents as their most pressing problems.
The survey showed that 21 per cent identified electricity as the biggest cost to SMEs daily business operations. This was followed by Rent 17 per cent and Cost of Capital and Employee stood at 15 per cent and 14 per cent respectively.
Commenting on the survey report, Esiri Agbeyi said “Access to finance, in particular credit, is a critical enabler for the growth and development of small and medium enterprises. The SME credit market, however, is notoriously characterised by market failures and imperfections. We estimate the financing gap for Nigerian MSMEs to be about N617.3 billion annually (pre-COVID-19 pandemic). More so, based on our analysis of data from the CBN annual statistical bulletin, small businesses accounted for less than 1% of total commercial banking credit in 2018.
We also see that Electricity accounts for the biggest costs to daily operations of MSMEs. Nigeria’s power sector is overwhelmed by a myriad of challenges that have culminated in inadequate electricity supply. This has an adverse impact on the business environment in Nigeria; consequently, contributing to significant economic costs to SME and economic growth. The International Monetary Fund (IMF) states that lack of access to reliable electricity costs the Nigerian economy an estimated $29 billion a year.”
The survey also found that the foremost economic issue affecting small businesses is the pressure to reduce prices which was 22 per cent. This is followed by rising inflation at 19 per cent and low demand for products/services. 16 per cent. The report said that the economic recovery in Nigeria has been tepid, adding that despite positive economic growth in the last 3 years, Nigeria’s GDP trajectory still falls short of the projections set in the Economic Recovery and Growth Plan (ERGP) of 4.5 per cent and seven per cent for 2019 and 2020 respectively.
Making comments on the report, Country Senior Partner, PwC Nigeria Uyi Akpata noted “Our MSME Survey 2020 is aimed at gauging experiences of sector players, assessing the underlying issues which MSMEs face and providing insights on this strategically important sector. You will find the survey headlines confirm some persistent problems and sheds light on those you never really considered to be issues such as payment policies.
MSMEs are critical to Nigerian’s economic development. According to the National Bureau of Statistics, SMEs in Nigeria have contributed about 48 per cent – on average – to the national GDP in the last five years.
Totalling about 17.4 million enterprises, they account for about 50 per cent of industrial jobs and nearly 90 per cent of activities in the manufacturing sector, in terms of number of enterprises. Despite the significant contribution of SMEs to the Nigerian economy, challenges still persist that hinder the growth and development of the sector. Challenges encountered by the sector include lack of skilled manpower, multiplicity of taxes, high cost of doing business, among others.
