NIGERIA: EXPERTS PROVIDE SOLUTIONS TO LIMITED FOREIGN EXCHANGE AND THE SLUGGISH MSMES SECTOR

The federal government has received advice from financial and economic experts on how to address the country's falling Micro, Small and Medium Enterprises (MSMEs) and forex scarcity.

The lack of labor capacity, the sustainability of market deliverables, and the extraordinary increase in market disruption for MSMEs across subnational levels and Ministry, Department, and Agencies(MDAs) in the nation had previously been mentioned as sources of concern by MSMEs.

Experts claim that the third quarter of 2022 will see a decline in the number of jobs created by MSMEs due to a lack of funding, the Japa Syndrome, market volatility, supply chain disruptions, factory closures, inadequate infrastructure development, supply side risk, the lack of access to foreign exchange, the encroachment of local taxes on the unorganized sector, and debt overhangs, among other factors.

Dr. Femi Egbesola, national president of the Association of Small Business Owners of Nigeria (ASBON), said recently that the Nigerian government is facing difficulties with the lack of available foreign exchange, adding that this has affected job creation for Small and Enterprises (SMEs), while companies have folded up and a significant number of SMEs are closing their doors due to the myriad of difficulties mentioned earlier.

He stated that many foreign partners are selling their holdings while local manufacturers and SMEs owners are leaving the country.

Egbesola said that the high cost of conducting business has reduced profit margins and that during electioneering season, the government has abandoned MSMEs in order to concentrate on winning elections and keeping its position of power.

Since more SMEs are fighting to survive the current headwinds and challenging operating environment, he claimed that this has a hugely detrimental effect on the commercial economy.

He continued by saying that in order to maximize market potential for the alleged beneficiaries of SMEs, government must collaborate with other businesses and diversify its commercial interests.

The ASBON chairman advised SMEs to investigate export opportunities to generate foreign currency and enhance MSMEs' overall market outlook to promote trade and investment.

In response, Dr. Muda Yusuf, director of the Centre for the Promotion of Private Enterprise (CPPE), urged the government to control inflation and reform monetary policy while highlighting some of the obstacles to economic growth, such as deteriorating purchasing power, persistent structural constraints, a lack of security, and crippling issues with trade facilitation.

Additionally, he emphasized how the manufacturing sector's poor performance has a big impact on employment, food inflation, and food security.

He claimed that due to its strong backwards integration content and high multiplier effect in the agriculture value chain, the food processing sector has the greatest influence on employment.

The head of CPPE provided suggestions to reverse the slowing GDP growth, among them “reducing the macroeconomic headwinds of high inflation and currency volatility.”

In order to bolster investor confidence, he also emphasized the necessity of addressing structural barriers to production and other economic activity as well as reforming the foreign exchange market.

The economist continued by saying that urgent action must be taken to control inflation and increase peoples' purchasing power in addition to starting to address the nation's logistical and security concerns.

To encourage economic inclusion and alter monetary policies to enable financial deepening in the economy, he said there has to be innovative support for small enterprises.

Ikpong Umoh, the managing director of Stellarchem Nigeria Ltd., lamented the formidable obstacles facing SMEs while highlighting how, among other factors, the foreign exchange and energy crises had a negative impact on the vital role that Micro, Small, and Medium-Sized Enterprises (MSMEs) play in the economy of the country.