How SMEs sur­vive high cost of do­ing busi­ness

Daily Trust - - BUSINESS - By Vic­to­ria Onehi & Si­mon Echewo­fun Sun­day

Hauwa Bello, pro­pri­etress of Mum­taz In­ter­na­tional School, Lugbe, says the cost of do­ing busi­ness has in­creased tremen­dously in the past few months due to hike in fuel price and in­ad­e­quate power sup­ply.

“In Lugbe, where my school is lo­cated, some­times for a whole day, there will not be power sup­ply; hence we have to use the gen­er­a­tor. Be­fore now, we spend about N3,000 to buy 40 litres of petrol but now we buy it N6, 000. Gen­er­ally, the cost of other items have gone up,” Bello laments.

Mr. Agbo Odeh who op­er­ates a sa­chet wa­ter fac­tory in Mararaba area of Nasarawa State, said his cost of pro­duc­tion has risen by 20 per cent due to epilep­tic power, more fuel cost and the ris­ing cost of in­puts and ser­vices. He said he has been at a cross­road as he is scared of in­creas­ing price which could send his cus­tomers away.

“I have called my staff to a meet­ing over three times on whether we should raise the price of sa­chet wa­ter from N10. What they al­ways tell me at each meet­ing is that, though the price of fuel and other ser­vices have risen, the per capita in­come of our cus­tomers has not grown,” he said.

Bakare Ade­bayo, CEO of Bread and More, ex­plains her plight. “Since Fe­bru­ary this year, we are just try­ing to sur­vive. Cost of flour and other ma­te­ri­als have in­creased by 33%. If I sell a big loaf of bread at N400 be­fore now and I choose to sell at N700 who is go­ing to buy? So, the lit­tle in­crease in the price of bread is not com­men­su­rate to the cost of pro­duc­tion. If our profit used to be N20 on each loaf it has re­duced to N5 , Ade­bayo ex­plains.

Ab­dul Gwani, a barb­ing sa­lon owner in Lugbe said the bar­bers’ as­so­ci­a­tion has not thought of in­creas­ing the rate from N200 per hair cut but the in­crease in fuel price has dealt a huge blow on their daily earn­ings from the job.

“The fact is, our daily earn­ings has now re­duced sig­nif­i­cantly by buy­ing petrol to fuel our gen­er­a­tors at ex­tra price. The dif­fer­ence in per litre of petrol is N58 and that is sig­nif­i­cant to us,” he said.

An­a­lysts at Afrin­vest (West Africa) Lim­ited were re­ported to have pre­dicted that in the short term, in­crease in PMS prices would add more pres­sure on con­sumer spend­ing .

They had noted that real in­come will also fur­ther ex­pe­ri­ence a drag, as they es­ti­mate in­fla­tion rate to likely over­shoot the 14.0 per cent mark in May. Ex­pect­edly, the in­fla­tion rate re­leased this week by the Na­tional Bureau of Statis­tics puts it at 16 per cent.

“The hike in fuel price will worsen prices, most es­pe­cially in ma­jor cities like La­gos and Abuja, as trans­port and elec­tric­ity, gas and other fu­els con­sti­tuted 23.2 per cent of the Con­sumer Price In­dex (CPI) weight­ing pres­sure, in the May in­fla­tion re­port. Hence, in­crease in gen­eral price level will hurt real wage rate sig­nif­i­cantly,” it re­ported.

The pre­sent sit­u­a­tion many SMEs op­er­a­tors said put them on the edge of busi­ness. “To some of us who got loans pre­vi­ously, the drag means more bur­dens to repay their loans while faced with lit­tle or no profit in the mean­time,” Abio­dun Se­gun, a fash­ion de­signer who started her busi­ness with a N2mil­lion loan in Abuja last year said.

Bar­ris­ter Kunle Olu­biyo, the Pres­i­dent of Nige­ria Con­sumer Pro­tec­tion Net­work in Abuja said the re­cent price hike has in­creased the gen­eral cost of liv­ing and do­ing busi­ness as “there are mul­ti­plier ef­fects of the PMS hike across the value chain of the econ­omy.”

Olu­biyo ad­vo­cated for the speedy pas­sage of the Pe­tro­leum In­dus­try Bill (PIB) which if en­acted he said would help to cre­ate more jobs, bring in more rev­enues to the gov­ern­ment for pro­vid­ing the needed mas­sive in­fras­truc­tural fa­cil­i­ties.

He noted that if there are in­fras­truc­ture in­clud­ing sub­sidised trans­port sys­tems and ad­e­quate power sup­ply, the cost of do­ing busi­ness and liv­ing would dras­ti­cally go down and the ef­fect of the do­mes­tic fuel price hike would be cush­ioned in the long run.

A small busi­ness owner Photo credit: In­ter­net

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