The whole world is just coming out of the crisis caused by COVID-19 and is considering policies to alleviate the plight of its citizenry. The Nigerian government, however, continues to issue, almost daily, policies that add to the excruciating hardship in the country. These include VAT increments, hikes in electricity tariffs, deliberate devaluation of the naira, and now a monthly increase in the price of petroleum products.
Nigeria has entered a recession after its gross domestic product contracted for the second consecutive quarter. For the masses who had long complained of not receiving government assistance or palliatives during the lockdown and who have had to take pay cuts or lost their livelihoods, the hike in the price of petrol and the cost of electricity are both retrogressive and oppressive.
In addition, regardless of the government’s failure to attain any tangible milestone in the aspect of infrastructure, health, education, power, and youth empowerment, the dawn of 2020 witnessed an increase in Value Added Tax (VAT) from 5% to 7.5%, with a further increase projected for 2021, followed by the restoration of the Stamp Duty Charge, all in the bid to boost internally generated revenue amidst dwindling foreign earnings from crude oil. This year also witnessed the introduction of Stamp Duty on house rents and C of O transactions.
Small businesses are the worst hit in this circus of unending hikes in fees and levies amidst the pandemic and rising inflation. Due to the pandemic, many businesses in Nigeria have been confronted with various issues ranging from staff physical and emotional well-being to their businesses’ sales, customer retention, cash flow, disruption of essential operational processes, and salary or wage payment.
The Fate Foundation report showed that an overwhelming 94.3% of businesses surveyed reported being negatively impacted by the pandemic, particularly in cash flow, sales, and revenue. Furthermore, while almost 50% of the businesses were able to identify opportunities despite the negative impacts of the pandemic (for example, creating new products and services, expansion, and diversification), most businesses reported needing support with cash flow and sales, and would like help in the areas of funding, access to markets, and business support.
The SME sector is the backbone of major developed economies and is essential to employment, economic, and export growth. According to the National Bureau of Statistics, small and medium-scale enterprises (SMEs) in Nigeria have contributed about 48% of the national GDP, and they account for 96% of businesses and 84% of employment.
Therefore, the continuous increase in fees and levies means only one thing: a general escalation in the mortality rate of small businesses. This worsening situation will have a ripple effect on the country’s economy and plunge more Nigerians into the already overflowing poverty pit.
Nevertheless, it is worth noting that, to date, the federal government has introduced several policies and programs to support Nigeria’s MSMEs and SMEs. For instance, since the pandemic began, the Central Bank of Nigeria announced a ₦50 billion (US$128.5 million) targeted credit facility to support households and micro, small, and medium enterprises affected by the COVID-19 pandemic, as well as the Nigerian Youth Investment Fund Initiative, among others. However, the government needs to do more to enable and support small businesses. The government should consider the following recommendations to promote the ease of doing business:
- Provide financial and non-financial support to reduce cash-flow burdens, such as grant programs in partnership with private and development partners, and low-interest financing.
- Offer non-financial support through regulatory reliefs, such as tax deferrals and other relief measures.
- Guarantee easier access to finance.
- Leverage the surge in online marketing by implementing policies that expand internet penetration, particularly affordable high-speed access for urban and rural areas.
Conclusion
Now is not the time for an incessant increase in levies, fees, and commodity prices. If more revenue is needed, avenues for theft, diversion, and wastage by public officials should be blocked, rather than subjecting barely surviving businesses to double exploitation.
Rather than tax businesses to their graves, the government should run lean by adopting technology and innovation to reduce the cost of governance. It is unfair to Nigerians to impose higher levies and commodity prices, especially when there is no policy effort to mitigate the burden this creates.
Resilience is a tool now needed more than ever; program design and intervention strategies for Nigerian businesses must aim at helping them build resilience in the short- to long-term. In the meantime, business owners should strive to implement strategies to help secure firm footing, prepare for harsh economic conditions, and ensure long-term sustainability.
REFERENCES
Lawrence N., Kingsley J., Rotimi A., Ahmadu B., Mansur A., Ayoyinka J., Charles O., Julius O., Ayodele A., Joseph W. & Ijeoma T. ‘Hard times in Buhari’s change regime’ (The Guardian, 05 September 2020). https://guardian.ng/news/hard-times-in-buharis-change-regime/ accessed 10 September 2020
FATE Foundation (May 2020) Impact of COVID-19 on Nigerian MSMEs.
PWC (2017). Nigeria SME Survey. https://www.pwc.com/ng/en/events/nigeria-sme-survey.html accessed 29 September 2020.
