Due to the challenging operating environment, businesses are having difficulty staying afloat. Additionally, the current economic situation in the country has further worsened access to funds. In this piece, ANOZIE EGOLE examines alternative funding sources that small businesses could explore in light of the increasing interest rate
Access to funds has always been a major challenge to Nigerian businesses, especially Micro, Small and Medium Enterprises. The country’s inflation has worsened the situation, forcing the Central Bank of Nigeria to dramatically increase the benchmark interest rate from 11.5 per cent in 2021 to 18.5 per cent as of July 2023.
Before the CBN raised the lending rate from 18 per cent to 18.5 per cent in July, banks were charging over 30 per cent interest on loans per annum.
Experts have argued that collecting bank loans is suicidal for small businesses, because of the high interest rates they have to pay, especially in the face of the country’s economic crunch.
In a recent report, the Nigeria Employers Consultative Association highlighted the burdens faced by organised businesses as a result of the increasing cost of living, which was caused by the hike in the price of Petroleum Motor Spirit and the devaluation of the naira.
The Director-General of NECA, Mr Adewale-Smatt Oyerinde, urged the government to take more drastic steps to stop the slide into hopelessness for organised businesses and Nigerians in general.
Oyerinde expressed concerns that the rising cost of living was already hurting Nigeria’s poverty and production index.
In the previous year, he said, the country witnessed perpetual rising inflation, commodity price instability, reduced industry capacity utilisation, and a gradual dwindling of the purchasing power of Nigerians.
Oyerinde also warned that the country’s accelerating inflation, if not controlled may hit 25 per cent before the end of the year.
His concern like most entrepreneurs in the country was that the recent decision by the Monetary Policy Committee of the CBN to raise the Monetary Policy Rate by 25 basis points to 18.75 per cent could be chaotic to the growth trajectory of the nation.
He said tightening the monetary policy stance by raising the anchor rate had proved ineffective.
“Based on the recent decision by the Monetary Policy Committee of the Central Bank of Nigeria to raise the Monetary Policy Rate by 25 basis points to 18.75 per cent, such an increase could be chaotic to the growth trajectory of the nation.
“It is apt that the apex bank collaborates with fiscal authorities in addressing the fundamentals behind the persistent increase in consumer prices, which has defied the policy measures put in place by previous rate hikes.”
To help small businesses overcome the challenges posed by the high interest rate, the Small and Medium Enterprises Development Agency of Nigeria has started soft loans to them.
According to the agency, the loan is targeted at small business groups that have been struggling to access funds.
Recently, Women in Logistics and Transport, a group of female entrepreneurs in the transport and logistics sector, drummed up the need for businesses to explore alternative funding sources.
They called for more deliberate actions and less rhetoric on the part of women entrepreneurs in the face of unfavourable policies.
During the Lagos at 11th edition of WiLAT Day Conference 2023 themed ‘Women entrepreneurs in a dynamic environment’, held recently in Lagos, the Chief Executive Officer of Lelook Nigeria Limited, Mrs Chinwe Ezenwa, urged members to start looking for another source of capital as banks were not ready to give out loans.
Ezenwa said that considering the current economic realities, it would be difficult for banks to give out loans because people may not be able to pay back.
“Some people still think the banks are the best places to get loans. The banks can never loan you the money. The best thing is to start looking for other sources of income.
“Looking at the President’s so-called palliative, the ones that caught my attention were that they were going to send money to small and medium enterprises because that is where I fall. No bank is going to loan anyone money, because people may not be able to pay back. How will you pay back with fuel costing N600 per litre, a dollar almost going to N1,000? How will you pay back when the cash flow is deceitful? So, one better start thinking strategically on how to finance the business,” she counselled.
Ezenwa charged the women to approach the Small and Medium Enterprises Development Agency of Nigeria for loans to boost their businesses.
“And one of that is to approach people out of the many people you approach, one person will listen. And that is where I think associations like ours should do more than just talk. We have become a talking group, we should do more. And we are left behind because we are not going to the centre,” she stated.
She encouraged small business owners to approach SMEDAN for soft loans.
“WILAT should be able to take us to such greater heights, I don’t want us to celebrate another year without this happening and I will not come. Because I see people sitting in their offices talking WILAT, but they are not moving to look for where the association can get financing. I meet people who are ready to do that, but they can’t do it as an individual,” added.
She urged the members to also leverage technology to boost their businesses, stressing the need for members to prioritise their movements.
“How do we leverage technology to face what is facing us now? You cannot continue to visit people, go to your offices with this fuel subsidy. No matter how much they give you, you can prioritise your movement.
“You have to use technology to reach your customers. You have to reduce the number of days you go to work, and you have to learn a remote working system. Find a way to cut your cost because everyone is now cost conscious. No matter who you are, it is affecting you. So, WILAT we need to top our ante in this issue,” she maintained.
A freight forwarder, Mr Ikenna Ejiogu, in a chat with the PUNCH, stressed the need for cooperative bodies to assist their members in sourcing capital to remain afloat.
Ejiogu urged Nigerians to embrace innovation and stay adaptable in the ever-dynamic world.
“So, as we move forward into the future, let us do so with heads held high and hearts another. Together, you are an unstoppable force,” he said.
The Chairperson of WILAT Nigeria, Khadijat Sheidu-Shabi, also stressed the need for knowledge transfer among small businesses.
According to her, shared knowledge would help small businesses; especially those run by women, said surmount the current harsh operating environment in the country.
“It also affords us networking opportunities to meet people of various backgrounds. This year’s edition will enlighten us on how to become better entrepreneurs in diverse ways. We know for any business to thrive it needs funding that is why we involve bankers.”
Nigeria’s former Minister for Aviation, Dr Kema Chikwe, hailed the leadership of WiLAT for being consistent over the years in advancing the cause of women entrepreneurs in the country.
She said, “How do we change the dynamics? How do we change our approach? How do we change our strategies, because they do not seem to be working? And that is the truth of the matter. Never mind that there are many women entrepreneurs, but I can tell you that while you are here, I am 100 per cent sure that the policies do not favour your enterprise. You are struggling to make it work.
“This applies to all the women entrepreneurs here because their feelings, challenges, problems, and path to success are not considered.”
Also speaking, the President of the Chartered Institute of Logistics and Transport, Mrs Mfon Usoro, noted that WiLAT had helped female entrepreneurs to be able to navigate the challenging business environment in the country.
“As we look back on the journey that brought us here, we cannot help but be amazed by the strides WiLAT has made through its collective, resilient membership, nationally and internationally. You started this unified body with a vision – a vision to break barriers, shatter glass ceilings, and create an environment where every woman can thrive and succeed. And see how much success has been made,” she said.
The Secretary-General of the African Shipowners Association, Mrs Funmi Folorunsho, encouraged women in the transportation industry to invest in knowledge.
Folorunsho encouraged them to tap the potential and opportunities in the African Continental Free Trade Agreement.
The female business owners argued that partnership with corporate bodies would help them survive the country’s current economic challenges.
The President of Women in Maritime West and Central Africa, Mrs Tosan Edodo-Emore, said members of her group would continue to partner with WiLAT to enable women to succeed in the transport and maritime industry.