The foremost economic issue affecting Small and Medium Enterprises (SMEs) in Nigeria is the pressure to reduce prices, PricewaterhouseCoopers has said.
It said this is due to two other economic issues – rising inflation and low demand for products and services.
In its recently published report titled “PwC’s MSME Survey 2020- Building to last”, the audit firm identified the other economic issues affecting SMEs as high interest rates, and exchange rates.
It said 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.
“Nigeria’s economy needs to be growing at an average rate of at least 5 to 7% to boost productivity and sustainable growth for businesses,” it said.
It pointed out that challenges such as high costs of borrowing and decline in disposable incomes, as well as weak consumer demand, continue to dampen performance.
Despite the economic issues, it said four per cent of business owners surveyed revealed that their businesses are not being impacted.
In the report, the firm pointed out how the global pandemic has affected the workforce, finance and liquidity, operation, and ‘business sentiment’ of the Nigerian businesses.
It said the pandemic disrupted the supply of labour, especially daily wage-workers as lockdowns persist.
It said for finance and liquidity, cash inflow constraints which will impact the ability to meet due obligations could lead to risks of credit default and bankruptcy.
“Loss of inputs to supply-chain challenges, as well as major customers to more adaptive and efficient large-scale competitors.
“Uncertainty may dampen positive business sentiment and impede the commitment of resources to drive growth.”
It gave key strategies which SMEs can adopt to reposition themselves.
It advised businesses to take actionable steps to ensure health, safety and well-being of workforce to sustain productivity and ensure innovative feedback.
“Strengthen cybersecurity platforms to minimise fraud and enhance information security and privacy of documents and internal resources.
“Ensure high-level prudence of corporate spending and reduce unnecessary recurrent costs.
“Adopt local quality materials as substitutes for imports in the short-term. Organise virtual training on technology tools and usage to upskill and improve staff skills.
“Strategise to meet current customer needs and enhance customer satisfaction via alternative and efficient communication channels.
“Stay informed and abreast of industry insights and related information that could enhance and improve strategies to mitigate risks and access new opportunities.
“Take up low-risk investments if necessary, amongst others,” it said.