SMEs
How We Can Survive Another Recession
Recent World Bank report has shown that Nigeria’s economy has plunged into recession for the second time in five years.
From 6.0 percent projected, the report shows Nigeria recording a second consecutive negative growth, contracting by 3.62% in the third quarter of 2020.
This week’s edition of “My Business” looks at the effects of the recession on businesses and how the country can work its way out of this terrible decline in economic activities.
Our senior correspondent, Lilian Peters, had a chat with some financial experts and business men in Port Harcourt, who bared their minds on the current situation. Read on.
A chartered accountant and the Managing Consultant of S.O Igwe & Co., Ambassador Silas Igwe, said the major factor that led Nigerian economy to contract was the fall in the price of oil, which is the major source of revenue of the nation.
Igwe who operates a professional auditing and tax management firm noted that oil “in fact generates about 80 percent of our country’s revenue”.
He also said that the effects of COVID-19 made many establishments to shut down operations, thereby denying them cash inflow.
This, he said, also impacted on the country at large, reducing the revenue the country would have generated.
“The truth is that the pandemic affected the economy of many countries including the developed countries and therefore threw them into recession. Some of the affected countries are: Britain, France, Italy, Canada, Germany, United States of America. Britain was the worst hit because their economy contracted by 20.4 percent.
“The recession could not have been prevented by the Nigerian government due to the natural causes but the right action by government can chat a way out.
“Government should adopt bail out to some selected and essential companies. Grant soft loans to the real sectors of the economy, empower households to enable them spend more, thereby stimulating the economy, as well as tackle corruption headlong”, he said.
Amb. Igwe further noted that the way forward for big and small companies would be “diversification of goods and services tendered so as to increase sources of revenue, adopt a competitive pricing policy in their businesses and a good customer relationships.
“There is also the need to reduce cost as much as possible, including overhead cost. Adopt marginal costing approach”.
The Managing Director, Integrated Oil Shore Services Nigerian Limited, Mr Chijioke Samuel Ekeke, in his own view, said the effects of the recession on businesses would be worse than imagined.
“I do not even know when we came out from the first recession. We are confused and business operations had declined due to scarcity of dollar and bit by bit remittance.
“To remit money for purchased tools and equipment, the bank will say only $10 would be paid at a time, even with N470 per dollar”, he said.
Ekeke urged the present administration in the country to fulfill its promises to the nation.
He said the Federal Government’s assurance that the country would exit recession by the first quarter of 2021 was not sacrosanct, explaining that the situation on ground has many unanswered questions.
“The only way forward is for the government to be committed to the masses and work with experts who know what to do in different situations”, he said.
The Managing Director, Isumana Nigerian Limited, Amb. Umana Idongesit Sunday, said the recession affected import, export and currency flow in the country.
Sunday, whose company deals on science and hospital equipments, noted that businesses were passing through harsh economic situation which in turn affected the country’s revenue generation.
He noted that, “Businesses are facing serious challenges under the present economic recession in the country caused by Coronavirus and other unmanageable issues.
“No currency flow, no foreign reserve, to boost the economy and no free flow of businesses.
“We import at a very high cost, supply at a high cost to the hospitals who in turn demand the recovery of their money from their patients”.
He commended the Federal Government’s initiative in the area of agriculture, especially the production and packaging of local rice to compete with foreign ones, he said more needs to be done in the area of infrastructural development and power supply.
“Without good road network and power supply, the cost of finished products would still be high. The rail system needs to work and the price of fuel has to come down to reduce transportation”, he said.
For a quick recovery from recession, Sunday urged the government to stimulate the informal sector to generate more jobs, while interest free loans are given to boost small and medium enterprises.
“Government should put round pegs in round holes. The use of experts in their respective fields would go a long way in helping us exit the situation we find ourselves.
“If government would leave party sentiment, tribalism, and pick qualified economic experts, then our recovery would be near”, he added.
The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) has reviewed the selection process for beneficiaries of a N5billion credit facility allotted, meant for small businesses in the country.
With the new procedure, the agency has mandated the submission of Corporate Affairs Commission (CAC) certificate and Tax Identification Number as a compulsory requirement to obtain the loan.
The Head of Corporate Affairs, Moshood Lawal, SMEDAN, made the disclosure during an interview with our correspondent recently in Abuja.
According to the report,last year SMEDAN signed an agreement with Sterling Bank to disburse loan options ranging from N250,000 to N2,500,000 at a single-digit interest rate of nine per cent, to facilitate the growth of small businesses through enhanced financial access.
The credit, with the target to assist over 10,000 Small and Medium Enterprises (SMEs), has a duration period of 12 months, to enable small businesses to leverage the facility fully.
Speaking at the signing ceremony, the SMEDAN’s DG, Charles Odii, described it as “an important milestone in our efforts to stimulate economic growth and drive prosperity by enhancing SME access to finance.
“We believe that the financial support, which comes at a very competitive rate, will help SMEs expand operations, hire additional employees, and contribute to an overall upswing in beneficial trade and economic activities”, he said.
But giving an update on the issue four months after, the spokesperson said a software application had been developed to smoothen the process and limit human interference on the credibility of the process.
He added that submission of CAC certificate and tax identification number was needed to identify fake applicants and ensure the fund is given to the right persons.
He said, “Concerning the N5bn loan for small businesses, We have developed an app and it is ready now. We are now taking submissions via the software application. Everyone is expected to download it, put in their business plan and every other detail. Then, they would be evaluated on the app.
“We had to move to an app to avoid human interference because almost everyone had a brother or a sister who tried to influence the process. So, it is better to register via the application, upload the Corporate Affairs Commission certificate, Tax Identification Number and other necessary documents.
“Once that process is fulfilled, the request will be evaluated and those qualified will get a reply immediately but if we had continued with former procedure, the process may be influenced.
“We also noticed that most applicants do not have their CAC certificate and that is a very important document to be submitted.
“Some persons have claimed not to have these certificate but we have insisted that it would be a very important criteria to receive the loan or they would be ineligible. We have promised to be transparent about this initiative and that promise will be kept”.
On the status of applicants who had registered earlier, Moshood explained that those applicants must start the process again using the newly developed app in order to be considered for disbursement.
“Everyone that initially applied for the grant would have to do it again. During the former procedure, they were not asked serious questions, they were only told to register but now we are asking specific questions on how the money will be utilised, the business turnover per month. It is via those questions we will be able to sort out real businessmen and fake ones”, he stated.
According to the report, over 200,000 small-scale businesses had earlier signified their interest to obtain the credit facility with successful applicants receiving emails from the bank.
The alarming rate of small scale business mortality in the country has been a reoccurring issue with the SMEDAN DG revealing that around three million businesses were lost due to varying factors such as insecurity, fraud, global competitiveness and lack of ease of doing business in the past few years.
Financial experts had expressed the view that with improved access to finance, more small business will become drivers of economic progress and important contributors to employment as well as economic and export growth.
As the economic condition continues to bite, a group of young entrepreneurs has extended support to some vulnerable Nigerians via a feeding scheme.
The group said in a statement that the initiative is aimed at providing nourishment to those in need, while drawing inspiration from the teachings of Jesus Christ.
A total of 820 individuals benefited from the programme, enjoying a diverse menu which included Chinese spaghetti, jollof rice, white rice, fried rice, and various soups.
The group from the Redeemed Christian Church of God Youth Church in Ikeja, Lagos, said the act reflects the commitment of the young entrepreneurs to make a positive impact on their community and address societal needs.
The initiative aligns with the Christian Social Responsibility mandate advocated by The Redeemed Christian Church of God, which emphasize the importance of demonstrating love and compassion to uplift communities and individuals.
Part of the statement reads, “The gesture is also in line with the Christian Social Responsibility mandate from The Redeemed Christian Church of God as a mission to meet societal needs through the demonstration of love that positively impacts communities and individuals to make a meaningful mark on the lives of individuals and families, spreading hope and nourishment in the community which is done at least once a month.
“This was led by the Provincial Youth Pastor of Province 1, Pastor Bisi Akande alongside Pastor Femi & Life Oyewunmi, Pastor Shola & Derayo Oladejo and Pastor Leke Adeboye & Titilope Adeboye”.
The Nigeria Customs Service (NCS) has deepened its relationship with its Benin counterpart in enhancing trade.
This follows a meeting held last Thursday between a deligation led by the Comptroller-General of Customs (CGC), Bashir Adewale Adeniyi, and his Republic of Benin counterpart at the Director-General of the Customs Administration of Benin Republic to strengthen collaboration between them.
The primary focus of the meeting, as outlined by the Customs boss, was to deliberate on strategies aimed at amplifying trade activities between the two nations and ensuring the seamless implementation of recommendations previously discussed during their rendezvous in Cotonou.
Highlighting the significance of the collaboration, the CGC said, “We are cognizant of the established framework for cooperation between our respective customs administrations.
“This framework was established at a higher level by the authorities of the heads of State, President Patrice Talon of Benin, and His Excellency President Bola Ahmed Tinubu of Nigeria, both expressing a desire to work together.
“It is upon this foundation that the Customs of both countries are united in their efforts”.
The Director-General of Benin Customs Administration, Mrs Adidjatou Hassan Zanouvi, in her remarks reiterated their steadfast commitment to executing the mutually agreed-upon measures.
Mrs Zaniuvi emphasised the importance of thorough monitoring to ensure effective implementation.
She noted that collaborative endeavours between the Nigeria Customs Service and the Benin Republic Customs Administration serve as a testament to their shared commitment to facilitating seamless trade operations and ensuring the efficient management of cross-border activities for the mutual benefit of both nations.
The CGC seized the opportunity to inspect ongoing projects within the Nigeria Customs Service, Seme Area Command.
He was accompanied by the Customs Area Controller, Seme Border, Comptroller Timi Bomodi.
By: Nkpemenyie Mcdominic, Lagos