• High importation costs, port charges, multiple taxation, others driving us out of business -Operators ν Many SMEs will die in 3 months if situation persists -Stakeholders
By Merit Ibe, Steve Agbota, Alloysius Atta, Okey Sampson and Ngozi Nwoke
Operators of Micro Small and Medium enterprises in major industrial clusters across the country are in deep pain and frustration over high costs of doing business.
In some cases, businesses are closing shop and people are being thrown out of jobs. The businesses are weighed down by high costs of importation of raw materials, port charges, unbearable exchange rates, tax issues, energy costs, and bank rates, among others.
As their pain continues to deepen, some of the operators and other stakeholders offer suggestions on how the government can lessen their burden to stem job losses while the enterprises remain afloat.
Government should slash clearing cost by 70% – SME operator
Mr Opeyemi Obafemi, a Lagos-based business owner, lamented that small and medium scale industries that create jobs and stimulate the economy are rather frustrated than protected.
“We in this category have always cried of the high cost of doing business, most especially energy and multiple taxes. In recent times, energy cost is as high as 40 per cent of production cost, and there are multiple taxes ranging from local government levies to state and federal government taxes.
“Added to these myriad of challenges are the burdens of high cost of diesel and petrol, the astronomical increase in the cost of raw materials underlined by the erosion in the value of the naira in relation to the dollar.
“Even if we can slightly agree with the removal of subsidy, though my position has always been that the Nigerian economy cannot withstand the multiplier effect of the removal, but the government had to remove it because it lacks the capacity to stall the monumental fraud that pervaded the subsidy regime, and floating of the naira.”
Obafemi further raised questions: “If the government claims that fuel subsidy removal and floating of the naira were twin necessary economic moves, is the astronomical increase in the clearing cost also not under the control of the federal government? I can say the clearing cost is responsible for up to 30 per cent of the inflation traceable to imported items.”
His position is based on the fact that most raw materials used by SMEs are imported, even as he regretted the fact that “the high cost of these materials have sent a good number of the small businesses into their early graves.”
In his frustration, Obafemi pointed out that the economic crunch in the SMEs sector has exacerbated the already critical unemployment situation. From his ugly experience as a small business owner, he predicted that if nothing is done in the next three months, the consequences on the economy will be better imagined than experienced.
“The government is only interested in raking in fat revenue, but we do not care about its impact on small – and medium scale businesses. The government should slash the present clearing cost by 70 per cent, which is under the control of the government. This will reduce the astronomical costs of imported raw materials and then slightly reduce the cost of running business. I do not mind high clearing costs on luxury items, but for raw materials, it must be slashed by at least 70 per cent.
“Multiple taxes must be discontinued as businesses in Nigeria are unnecessarily overtaxed and even the tax is never used for the payers. You still generate your own electricity, provide your own water, sometimes, you provide roads for your goods to be transported. They should defend the naira against the dollar to bring down the rate.”
Port charges, high import duties, FX killing importers, businesses
Hundreds of businesses have shut down operations while many Nigerians have become jobless due to high exchange rate and import duty for clearance of cargoes at the nation’s seaports, according to many stakeholders.
Saturday Sun gathered that since the floating of the naira by President Bola Tinubu administration, exchange rates have increased astronomically.
Importers are lamenting the high costs of importing cargo into the nation’s ports. For instance, the freight cost for a 40ft box from China to Nigeria is about $8,500 while to Ghana and Lome is $3,500 and $3,000 respectively.
Saturday Sun also learnt that before now, importers used to clear a 40ft container with about N6 million, now, the same container is being cleared with between N13 million and N25 million.
As a result, many importers have left the nation’s ports for neighbouring countries to continue their businesses. This is one of the reasons Nigeria is losing cargo on a daily basis while people are also losing their jobs and businesses, it was gathered.
A former acting President of the Association of National Licensed Customs Agents (ANLCA) regretted that the Nigerian Customs Service has been celebrating meeting its target while Nigerian ports are losing cargo.
“Our cargo is declining on a daily basis. Nobody seems to be interested in looking at it. Between now and next year, the level of cargo that will drop is not going to be less than 30 per cent and the government is not thinking about that.
“Take the issue of vehicles for instance, I don’t know why the government should not remove levies on used vehicles. Vehicles are now going to Cotonou Port and they are finding their way back to Nigeria. We are losing cargo on a daily basis and the government is busy increasing Import Adjustment Tax,” he added.
He added that Nigeria does not have liberalization of trade because the government is only interested in revenue generation.
Meanwhile, an importer and President, Association of Motor Dealers of Nigeria (AMDON), Prince Ajibola Adedoyin said the hikes in taxes, fuel and tariffs have affected importation of cars into the Nigerian ports.
According to him, the situation has driven a lot of importers out of the car business and the consequences are heavy.
“We believe we are part of the people that are close to that sector and with the forex, which is high… And then what puts pressure upon it is the increased import duty and we have told the government to do something about it. If not, the after effects will be very drastic.”
President of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero, urged the federal government, through the Central Bank of Nigeria (CBN), to implement a special exchange rate for calculating import duties.
Amiwero expressed concern over the current practice of using floating exchange rates for customs duty calculations. He believes that this approach has contributed substantially to the rising costs of goods and escalating food prices in Nigerian markets.
“We wish to highlight to the federal government the severe challenges faced by Nigerians, particularly due to the soaring prices of goods driven by the floating exchange rate applied to import duty computations.
“This issue has drastically reduced importation, disrupted transportation, and made basic foodstuffs increasingly scarce, especially for those who struggle to make ends meet and have no financial safety net,” he said.
To address these challenges, Amiwero called for measures to eliminate the uncertainties and inconsistencies associated with the current exchange rate system.
He stressed the importance of stabilising the domestic trading environment to provide a more predictable framework for importers.
The Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, expressed concern that the problem of the prohibitive and unpredictable exchange rate for cargo clearance is yet to be addressed by government.
Yusuf said a major policy adjustment needs to happen to complement current measures in addressing the current cost-of-living crises in the country.
According to him, the heightened risk of cargo diversion to neighbouring countries and smuggling could jeopardise the realisation of customs revenue targets.
He said this situation additionally creates serious competitiveness challenges for ethical and compliant investors in the economy because of their relatively elevated production and operating costs.
Yusuf urged the presidency to peg the customs duty exchange rate at N1,000 per dollar for the next six months in the first instance through an Executive Order.
‘In Aba, naira devaluation is our major problem’
In Abia State, just like in some other parts of the country, SMEs are going under as a result of the harsh economic climate.
Chief Emma Obi, owner of Polema Industries Limited, a subsidiary of Mobison Interlink and Associates Limited, Aba, told Saturday Sun that the depreciation of the naira is a major problem his company is facing.
“The devaluation of the naira has astronomically increased the price of our raw materials with its attendant high rise in the cost of production.
“The palm oil which is one of our major raw materials, which we used to buy for N455,000 per ton, is now almost N3 million.”
On what the government should do to help them, Obi said the government should not adhere to the advice of institutions like the IMF and World Bank and should restore the naira to what it used to be before this government came to power. He also urged the government to reduce high import duties, reduce electricity tariff and high interest on bank loans.
Onitsha SME operators: Our businesses are closing shop
Emmanuel Ozoude, an operator with a polythene products production plant in Onitsha lamented that the skyrocketing prices of raw materials and energy bills are crippling their business.
Ozoude, who said he has been in business for the past 10 years, expressed regret that the government has not done anything to assist small business owners but instead takes more from the struggling entrepreneurs.
He recalled that they used to buy virgin raw materials they use in production at the rate of N18,000 per bag.
“The increase in prices started after the policy on exchange rate when it jumped from N20,000 to N43,000. The whole thing resulted in price hike because once production cost increases, the selling price will also increase. Products that we used to sell for N3,000 jumped to over N7, 000 so that we can meet up.
“Currently, the same material we bought last year for N40,000 is now N59,000 plus. Sometimes it can jump to N70,000 plus, making the whole business so unstable. We deal in petrochemical industry products and raw materials and we source them most times from Eleme in Rivers State.”
“To buy or replace our machines is another big problem. Machines we used to buy at the rate of N250, 000 is now between N500, 000 and N600, 000. The local engines we buy are also not coming cheap anymore.
“Coming to the workers, we are also compelled to increase their take home pay. After all, we know how much a garri or a bag of rice costs today.” He said the government can help in subsidizing the energy tariff so that the cost of production can also be reduced.
Isaac Okeke, who operates a plastic recycling plant at the small business cooperative market, Ezeiweka Road, Awada Obosi was seething in anger when the reporter encountered him to share his challenges.
Out of frustration, he told Saturday Sun: “We help the government in various ways but the government is not helping us at all. We are the people helping to maintain the city’s clean environment because we engage people who scout and collect various disused plastics, polythene materials and pet bottles that litter the environment. But what do we get in return? Government and its agents don’t want us to breathe.
“Pick anything on the street, you pay, dispose of anything, you pay, run the engine here, you pay. Look at that tipper loading some of the waste products we need to dispose of, they charge us N25, 000 per trip and as they load, government agents still come to collect revenue for each trip. What do we do to survive this multiple taxation?
“It has been a continuous battle with the energy distribution companies too. Many of our members have dismantled their machines because they cannot pay the bills anymore. We hear that both the state and federal government reel out various huge amounts of money which they claim they give to SME operators and we continue to ask, who are the beneficiaries?”
Mrs Nkechi Asoluka who runs a small scale bar soap manufacturing factory in Onitsha also told the reporter that she is at the verge of giving up because of the continuous rise in the prices of raw materials.
“My blood pressure is rising with the cost of materials too. Imagine finishing a particular production line and supplying that batch, you now go to buy another batch of raw materials for the next production only to discover that the prices have increased by 100 per cent. Do you suddenly go back and sell a bar soap you sold N300 at N600 the next day? This is what we are passing through here and it is not funny at all.
“Until government takes the bull by the horn by taking drastic action to reduce pump prices of petroleum products and also stabilise the naira, then provide incentives to the SMEs, it is a bleak future for us” she stated.
Lagos chamber calls for State of Emergency
The Lagos Chamber of Commerce and Industry (LCCI) recently expressed concerns over the impact of new government policies on Small and Medium scale Enterprises. Among the actions of the government that are hampering the survival of small businesses are exchange rates, Monetary Policy Rate (MPR) and electricity tariffs, which operators have described as significant contributors to the escalating cost of doing business in Nigeria.
Director General of the Chamber, Dr. Chinyere Almona, highlighted the challenges faced by businesses in importing and clearing goods at Nigerian ports, particularly due to fluctuating import duty exchange rates, which hamper effective business planning.
Almona also emphasised the impact of higher interest rates and increased borrowing costs for businesses seeking working capital and expansion opportunities. The LCCI urged the government to reinvest savings from discontinued subsidies and taxes into critical infrastructure such as power, logistics and security, noting the disproportionate impact of policy decisions on small and medium-sized enterprises (SMEs), which rely heavily on affordable credit and operate on thin profit margins.