By Merit Ibe, [email protected]
Nigeria’s Organised Private Sector has expressed fear over a possible total shutdown of more small businesses and its attendant job losses following the hike in the pump price of fuel occasioned by the subsidy removal.
So far, many nano, micro and small businesses have been struggling to survive in recent years owing to the fallout of the COVID-19 pandemic, the Russia-Ukraine war and now the escalating fuel prices.
According to the operators, small businesses, mostly hit by any shock in the economy, are groaning and grappling with a number of challenges including poor power supply, rising borrowing costs, soaring inflation, restrictive economic policies, foreign exchange volatility and tax multiplicity.
The latest being the recent petrol price hike, is already taking a toll and threatening many business.
Aside manufacturing and small businesses, the prices of diesel and petrol have also impacted the transportation sector, resulting in higher fares and contribution to the cost of living.
Commenting on the development, National Vice President, Nigerian Association of Small Scale Industrialists (NASSI), Segun Kuti-George, said the development would put further strain on businesses that were already grappling with increased costs associated with the government’s recent economic reforms.
“It will bring additional burden on small businesses, who have to contend with the creation of alternative sources of energy to run their businesses. The only fearful thing for me is that our own case as a country does not obey economic theories. It doesn’t respond to market forces.
“It should not be an upswing all the time. If the price of crude in the international market comes down, it is expected that the pump price should also come down. But whether that will happen in Nigeria is a different ball game because whatever goes up, stays there.”
Former National President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ide John Udeagbala, said the recent hike in petrol prices will further cause another round of increases in the prices of goods and services and worsen the cost of living crisis, with fixed-income earners most hit.
He added that the association is not against subsidy removal but is concerned about the impact on businesses already burdened with several economic shocks.
According to him, if nothing is done to cushion the negative impact of the subsidy removal, more micro, small and medium enterprises will shut down operations, thus accelerating the country’s unemployment rate.
He said with the high energy use, small business owners often transfer the burden on cash-strapped Nigerian consumers, who have to bear the brunt.
Udeagbala called on the Federal Government to urgently fix the country’s four refineries, which have remained comatose for the past 16 years, to end petroleum products importation.
“It will also address the impact of fuel subsidy removal without adding additional debt burden on the nation. Besides, our ability to provide some basic raw materials internally will help our industries to compete better to benefit from the African Continental Free Trade Agreement.”
Also Deputy President, Lagos Chamber of Commerce and Industry, Gabriel Idahosa, said the increase in petrol price would usher in severe hardship for businesses, especially in the near-term.
“In the near term, there will be a lot of hardship. A lot of small businesses will crumble completely. There will be a drop in production capacity. How fast we can get out of it is what the conversation is about now.”
A business man who deals on sachet water production, Jude Ifeka said SMEs are the bedrock of the economy. “They have very low capital base, they do not have strong shock observer, as such and any shock in the economy affects them first.”
He lamented that before SMEs recover from any shock, most of them would have suffered irreparable loss.
“Once there is a shift in the economy, it affects the SMEs directly. Most of them are engaged in the informal sector and deal in consumer goods, which come mostly through the borders.”
Another small scale producer of food packs, Shade Umo expressed worry that more businesses would collapse due to the increased hardship that would characterise the operating environment.
According to her, increasing the pump price of petrol at a time small businesses were fighting for their lives as a result of the recent removal of fuel subsidy was suffocating many SMEs.
“I just wonder how we will survive. I foresee quite a lot of businesses going under. I don’t see how micro and small businesses can survive this. Many will go down.”