Home Business Nigeria’s MSMEs turn to technology as cost of business toughens – Expert

Nigeria’s MSMEs turn to technology as cost of business toughens – Expert

Small and medium-sized businesses in Nigeria are starting to use technology to stay afloat in the face of escalating business costs. Lynda Saint-Nwafor, the Chief Enterprise Business Officer at MTN, recently disclosed this. She made this statement during the just-completed Doing Business in Nigeria Conference (DBNC), which took place in Lagos.

According to her, SMEs have discovered alternate sales channels as a result of sluggish demand, with 20% of established enterprises reporting selling through online platforms.

  •  “Likewise, there has been a proliferation of Nigerian startups offering MSMEs digital SME services, including quick credit, payment wallets, and bookkeeping services,” she said.

According to Saint-Nwafor, the number of MSMEs in Nigeria decreased by 2 million between 2017 and 2021, with the majority of important metrics showing a declining trend.

She claimed that pandemic-related factors and bad socioeconomic conditions were to blame for the 4.5% drop in business numbers to 39.6 million in 2021.

  •  “Nigeria’s growth in real domestic product is relatively slow when compared to the Africa average, with growth forecasts of 2-4% per annum over the next five years,” she said.

Cost of doing business

She also stated that 54% of MSMEs in Nigeria have identified the rising cost of doing business as a major deterrent to the growth of their business with annual inflation at ~20%, the highest since 2005.

Highlighting the cost of doing business in relation to the value of the naira, she said while the official rate has only increased by ~3X from N150 in 2021 to N435 in 2022, the parallel-market rate has increased by ~5X from N154 in 2010 to N737 in 2022, stressing that significant devaluation of the naira is driving price volatility and impacting business success.

  • “There are ~40 million MSMEs in Nigeria; over 90% of these are sole entrepreneurs, scattered across the country and operating informally. 95% of MSMEs are not formally registered with the Corporate Affairs Commission (CAC). 70% of informal businesses are in agriculture and wholesale/retail trade sectors,” said Saint Nwafor.

She stated that limited access to funding, rising costs of doing business, and increased technology usage are three key trends observed within the Nigerian SMEs landscape.

Limited access to funding 

  • “Only 4% of MSMEs in Nigeria reported having access to commercial credit finance with 59% citing personal savings as their primary source of capital.
  • “Even when funding is available, low awareness of opportunities and a lack of financial knowledge remain major barriers to SMEs accessing the required support.
  • “20% of MSMEs also indicated inconsistent power supply as a top challenge, leaving businesses to source other alternative power supply,” she said.

Highlighting some of the challenges SMEs face in Nigeria, she said despite funds chasing start-ups and other businesses, only 4% of MSMEs reported having access to commercial credit finance, mainly due to low awareness of opportunities and lack of financial knowledge.

She added that SMEs are constrained to local and niche markets, low product differentiation, low productivity, and costs to reach target markets.

She urged SMEs to employ digital marketing techniques -social media advertising, SEO, etc. to reach a wider audience and increase online visibility by analyzing user data to create targeted campaigns to increase traffic and conversions.

Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Articles

BusinessGlobal News

New Year: Dr. Olaosebikan Felicitates Stakeholders, Calls FG To Stem Tide Of Insecurity

The chief executive officer of McEnies Global Communications, Dr. Omolaraeni Olaosebikan, has...