Small Businesses in Nigeria have listed the most pressing problems impacting their operations to include obtaining finance, finding customers and infrastructure deficits.
These are some of the findings from a survey of Micro, Small and Medium scale enterprises (MSMEs) in Nigeria conducted by PwC Nigeria.
The survey findings were revealed during a recent webinar hosted by the firm for MSMEs on Managing the Impact of COVID-19 and Repositioning Your Business for Growth.
The report titled PwC’s MSME Survey 2020- Building to last is the first in a series of surveys that aim to provide insights into a range of issues concerning MSMEs in Nigeria, and the challenges impacting business growth, particularly financing, taxation issues; and other factors – through the eyes of their CEOs.
The survey which was conducted prior to the COVID-19 Pandemic (between August and December 2019) sought the opinion of 1629 key decision makers in the MSME sector surveyed with annual sales turnover ranging from N5 million and above.
The businesses surveyed had a geographical spread covering 29 states and across the 6 geopolitical zones in the country.
Presenting results of the findings Esiri Agbeyi, Partner and Lead, Private Wealth Services, PwC Nigeria noted that Obtaining finance (22%), Finding customers (16%) and Infrastructure deficits (15%) were identified by respondents as their most pressing problems.
When asked what the biggest cost to their business operation is, 21% identified Electricity as being responsible for the highest cost to their daily operations. This was followed by Rent (17%) and Cost of Capital and Employee cost at 15% and 14% respectively.
The survey also found that the foremost economic issue affecting small businesses is the pressure to reduce prices (22%). This is followed by rising inflation (19%) and low demand for products/services. (16%). The economic recovery in Nigeria has been tepid.
Despite positive economic growth in the last 3 years, Nigeria’s GDP trajectory still falls short of the projections set in the Economic Recovery and Growth Plan (ERGP) of 4.5% and 7% for 2019 and 2020 respectively.
On tax matters, MSMEs find local government levies (28%) the most difficult tax to comply with. This is closely followed by Company Income Tax (CIT) at 26% and Value Added Tax (VAT) at 25%.
Reasons for the difficulty in compliance comprised: the multiplicity of taxies and levies; lack of coordination between federal & state tax agencies, absence of technology platform(s) for ease of payment of all taxes and levies, as well as lack of fully functional tax refunds schemes at the state & federal level.
Others included the absence of comprehensive tax payment schedule notification or calendar, and physical harassment/intimidation by local tax collectors.
Highlights of some of the other findings made in the survey include that 22% of MSMEs rely on the internet, media and research publications for business insights (vs 16%who rely on professional service providers), 48% said family & friends are the most popular financing sources (vs 15% who obtained credit facilities), A higher percentage (46%) would prefer private equity over debt financing (33%), and only 10% of MSMEs believe Artificial Intelligence (AI) and the Internet of Things (IoT) will have the most impact on the growth of their businesses in the next 3 years.
One remarkable finding was how payment policies imposed by big corporates severely affected 33% of MSMEs whose payments were delayed for more than a month.
The impact on cash flows is worse when you consider the double-digit interest rates or inflation. It does not come as a surprise then when about 50% of the SMEs surveyed did not record growths above 20% over the last 3 years.
The objective of the study according to PwC is to capture the challenges the MSME sector faces, identify opportunities to unlock growth and investment, provide solutions, mitigate risks and assess the outlook for MSMEs across industries.
Findings covered the Nigerian business environment and market conditions, tax issues, access to finance, growth obstacles, payment policies, the role of technology and the impact of women on the MSME sector in Nigeria.
The report also includes case studies with leading SME players across various sectors, as well as interviews with key stakeholders and experts on the sector.