DESPITE recording a 3.19% growth (year-on-year) in real terms, in the second quarter of 2024, not a few Nigerians, especially economists, still hold the strong belief that the nation’s economic fortunes are in a dire strait. This position may not be farther from the truth.
A glimpse into Nigeria’s economic scorecard will no doubt leave any concerned Nigerian with some goose pimples.
In Q2 2024 GDP report, despite the economy recording its fifteen consecutive growth, such growth was primarily driven by both oil and non-oil sectors, which grew by 10.15% and 2.80%, respectively.
Ironically, two critical sectors: Agriculture and Manufacturing, regarded as the largest employers of labour, in the period under review, never experienced such tangible growths; a development, analysts see as a pointer to an ailing economy.
For instance, while agriculture recorded a minimal growth of 1.41% from 0.18%, in the period under review, growth in the manufacturing sector dipped from 1.49% to 1.28%.
Interestingly, while the big businesses are groaning under the heavy burdens of government reforms, with some looking for alternative and conducive environment to do their business, outside the shores of the country, the small and nano businesses are not spared either.
“The high and rising cost environment continues to shrink profitability and, in many cases, threaten the existence of many operators in this critical sector of the economy. More worrisome is the fact that the sector that should propel job creation, productivity, and economic growth is enmeshed with series of challenges that constantly limit its contribution to the Gross Domestic Product (GDP),” the President, Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye, has said.
For the operators of such businesses, the ‘streets are not smiling’, the unending hike in the price of premium motor spirit (PMS), popularly known as petrol, has begun to take its toll on their businesses.
“But, unlike the big businesses and multinationals, our hands are in the air. We are at a crossroads, with neither the means nor the clout to relocate elsewhere,” said Makinde Adams, a Lagos-based fashion designer, whose hitherto huge clientele base has experienced massive erosion, due to trying economic times, of late.
In the past, the father of three would have begun the ‘Christmas vigil’ in his shop, by now. But the rush, usually associated with the ember months is far from being seen.
“At present, we are still praying and hoping. Nothing in the air is suggesting the huge Christian festival is around the corner,” he stated.
The scenario at the bus stop, in Alimosho area of Lagos, where Ahmed, a vulcaniser, eke out a living, vividly illustrates the headwinds small businesses seems to be experiencing of late. For instance, the new price of petrol has negatively impacted his business, buying petrol at over N1,000 remains a tall order for him, for now, since it is difficult to pass down the cost to his customers, wholesale.
“How do I tell my customers now that I will, again, need to adjust my price template to be able to remain in business?” he threw a rhetorical question at the reporter when asked about how he had been faring, especially with the recent hike in the price of petrol.
Tilting his machine to ensure that the small quantity of fuel, remaining in the machine’s tank, complete the work he was doing, Ahmed believed, many artisans might be forced to shut down if urgent action is not taken to address the situation.
“Ordinarily, by now, I should have changed this engine, because it’s obvious it is no longer giving me the result I wanted. But where is the money? I used to buy the engine, few years ago, between N12,000 and N13,000. Now it’s N85,000. Besides, you can see the petrol tank is empty. It is because one has been finding it so difficult to adjust to the new price of petrol. It’s just too high for a petty business, such as ours, that rely on the commodity to work,” he lamented
These are equally trying times for Esther, an Ota-based grocery, yam seller. Esther deals in seasonal fruits and crops, ranging from cucumber, maize, yam and others. But, of late, each time she goes to the market, her capital is not always enough to restock, after disposing her old stock, she complains.
“You can see that what I have now is not as much as what I used to have in the past. It is as a result of the volatility of the market. You only know the price of what you are buying today. You are not really sure of how much you are going to buy it tomorrow, a development that is not good for the business,” said Esther, who has temporarily suspended yam from her stock, due to its price volatility.
For experts, the pains and travails small businesses are presently experiencing in the country should be a source of concern for every Nigerian.
Thus much was said by the MAN, which, had once warned that unfriendly business environment would worsen the plight of2 84 percent of Nigerians, and businesses.
The association, then, through its Director General, Segun Ajayi-Kadir, had identified poor power supply, high energy cost, and unfavorable credit due to high interest rates, as some of the factors that could make operators of small businesses vulnerable.
Adebisi Adesuyi, a Public Affairs analyst and Chief Executive Officer, Wealthgate Advisors, also believed Nigeria had never had it this bad.
“We’ve never passed through this tough economic path before. Inflation is over 33% and unemployment is above 30%. Over 70 million Nigerians are caught in the poverty trap at the moment and more people are becoming poorer on a daily basis. There is food poverty in Nigeria. There is health poverty. There is energy poverty,” he stated.
Adesuyi believed the floating of the local currency without a cap, has grossly undervalued the naira at N1,650 to $1, a development, he stated, has increased the cost of production significantly, for a nation that imports about 70% of its industrial inputs and consumer goods.
“For a nation that imports about 70% of its industrial inputs and consumer goods, the undervaluation of naira has increased the cost of production significantly.
“Hence, most businesses cannot import as many industrial inputs as they used to. Local manufacturers have therefore been forced to reduce their outputs. Consequently, many workers in the private sector are losing their jobs.
“The second cause of the economic crisis is the rising cost of fuel which is N1,070 per litre at the moment. Small business owners who relied on petrol generators to power their business operations are becoming unable to continue in business because of the high cost of fuel.
“The monthly incomes of workers who have to travel to their workplaces daily are becoming unable to pay their return fares in one month. The increase in minimum wage has not helped because inflation has made the workers’ real income very insignificant.
“Thus, the purchasing power of most Nigerian workers has fallen considerably as a result of high inflation. This has affected the demand for goods and services thereby threatening the survival of small and medium businesses,” the Wealthgate Advisors boss stated.
But, despite the gloom, despair and grim the present scenario typifies, Adesuyi believed the situation is not intractable if the relevant authorities do the right thing.
For the economy to begin to experience the much-desired positive growth, the local currency must regain its real value through effective policy measures by the central bank, he stated.
Adesuyi also called for a combination of appropriate monetary and fiscal policies to bring down inflation, insisting that it should no longer be business as usual.
“The people in government should think out of the box to bring down the cost of PMS without corruptly enriching individuals with fraudulent subsidies. This should be achieved by getting the right value from Dangote Refinery and others.
“If the value of Naira improves significantly, inflation is reduced and fuel is also made affordable, the economic wellbeing of Nigerian households and businesses will improve correspondingly,” he added.
Same sentiments are also echoed by the Chief Economist at SPM Professionals, Dr. Paul Alaje. Alaje, who argued that it was wrong for the federal government to have floated the naira, in an import-dependent economy such as Nigeria’s, advised that one of the low-hanging fruits government must explore is to peg the value of the local currency, for now at N1,000.
“The cause of all these high costs of petroleum price, and its attendant results on the price of goods and services is because of the present value of the naira. While the government might want to make more money for itself, by undervaluing the naira, against the foreign currencies, it should also consider the interest of the average Nigerian, too. If the value of the naira is pegged at N1,000 today, the prices of goods and services, including that of petrol will come down significantly,” he added.
As a way out of the present economic crises, the MAN would want an establishment of special intervention programmes to drive activities in growth sectors like agriculture, manufacturing, textiles/fashion, ICT, transport/logistics, and others.
“In areas with high levels of illegal oil bunkering, we could consider licensing the many artisanal refineries to contribute to job creation, revenue generation, and reduced pipeline vandalism and oil theft,” the association advised.
The association would also want the government to urgently address the binding constraints that make the local products uncompetitive, as a way of addressing the downward trend and the uncertainty the economy has continued to experience in recent past.
The Lagos Chamber of Commerce and Industry (LCCI), on its part, believed addressing the challenge of insecurity, presently bedeviling the country, and strategically focusing on increasing national agricultural productivity, is the way to go.
“We specifically recommend that the government incentivise sub-national governments, particularly at the grassroots levels, to increase funding and investment in the agriculture sector to boost productivity,” its President, Mr. Gabriel Idahosa stated.
The chamber also called on the Central Bank of Nigeria (CBN) to incentivise banks to allocate more credit to agriculture and agro-processing to improve the sector’s private investment and productivity growth.
LCCI also urged the government to pay more attention to the manufacturing sector by addressing factors contributing to the high cost of production, including high inflation, high interest rates, multiple taxation, and volatile exchange rates.
It also believed that managing the persistently high inflation demands that monetary and fiscal authorities should focus on the factors driving the inflation rates by tackling supply-side deficiencies instead of focusing too much on demand-side management.
But, as the recommendations and antidotes to the depressed economy keep pouring in, from critical stakeholders, the concern, among many Nigerians, is whether the relevant authorities would come down their high horses, to implement some of the recommendations to bring relief to the nation’s troubled SMEs.
READ ALSO: UK deports 44 Nigerians, Ghanaians in single flight — Home Office