Charles Nwoguji and Merit Ibe

Small and Medium Scale Enterprises (SMEs) are as old as other larger businesses in Nigeria. As the economy improves, trading conditions get better for the small businesses but as the trading environment gets harsh by the day, the small enterprises are worst hit due to the nature of their industry.

The closure of Nigeria’s land borders since August 20 this year appears to be taking a huge toll on manufacturers and even the small businesses across the country and the impact is showing everywhere.

Three months after, while some stakeholders are in deep pain, others are smiling to the bank in support of the closure.

When the nation’s borders with neighbouring countries were shut in August, President Muhammadu Buhari said the action was taken to curb smuggling. The move which remained very unpopular with most Nigerians has however continued to elicit reactions from different stakeholders.

But as if to demonstrate its readiness towards sustaining the border closure policy, the Federal Government recently ruled out any plan to review the policy, until neighbouring countries learnt to respect Nigeria’s sovereignty particularly with respect to  violation of  its anti -smuggling  laws and the placing a ban on both legitimate and illegitimate movement of goods in and out of the country.

Since it began observers have noted that the environmental toll of the policy the ECOWAS nations has been high, with the fate of SMEs looking quite gloomy.

SMEs are strategic and essential for accelerating economic growth in Nigeria as they constitute about 90 percent of all the businesses in the country, creating more than 80 percent of employment. The contributions of SMEs to the Nigerian economy cannot be overstated, being the engine that drive the nation’s economy. According to the Central Bank of Nigeria report (2003), small scale companies are firms with a workforce of 11  to 100 workers and a total cost of not more than N50 million, including working capital and excluding cost of land, while medium scale firms was defined as firms that have a labour force of between 101 and 300 workers with a total cost of over N50 million but not less than N200 million, including working capital but excluding cost of land.

The manufacturing sector employees range up to 1,500, depending on the industry.

Retailing is small if annual sales or receipts are not over $2 million to $7.5 million.

Wholesaling is small if yearly sales are not over $9.5 to $22 million.

Services are annual receipts not exceeding $2 million to $8 million.

With this, the role SMEs play in the development of the country is very important. They have greatly contributed to the Nigerian development in terms of employment, growth and marketing of goods and services. The government is turning to small and medium scale industries and entrepreneurs as a means of developing the economy and solving problems.

Poor infrastructure, bad governance, problems of undersized market, legal and organisational barriers, inadequate access to credit, stifling business regulations and insufficient regional amalgamation are also militating against the growth of SMEs.

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With the border closure, the pains of small businesses are aggravated. These conditions have posed major risk to job creation and economic growth.

Unemployment and poverty looms, as over 90 percent of Nigeria’s trade with the West African sub region is by road, thereby rendering transporters jobless.

Export of local goods contributes about 80 percent profit to local manufacturers that are into production of goods, and being in production is not only to serve the local market, but also to export to boost revenue profile.

With the closure, small businesses have suffered huge losses and incurred major lapses in financial transactions, and loss of revenue for the company due to unavailability of critical raw materials, just as production lines are shutting down and workers are being laid off.

Findings showed that foods and beverages manufacturers are not left out, due to their inability to import already purchased raw materials, while goods meant for the ECOWAS sub-region and trans-saharan markets have been prevented from leaving the shores of Nigeria via the country’s land borders.

Investigations revealed that the inability of some SMEs to meet up with the orders in the Letter of Credit (LC) from foreign partners has also put them in trouble as they have failed to comply with ECOWAS protocols, owing to the closure. As such, some companies are finding it difficult to service the loans they secured to import some consumable goods and raw materials, which has adversely affected their business relationship and financial transactions.

Some in the agriculture sector, who produce mainly for export, are losing out as 80 percent of the revenue bases of such people are from export materials. Perishable goods stocked in some warehouses are now spoilt, expired or damaged due to heat, while some companies are now unable to bring in raw materials already paid for, which were purchased from neighbouring countries, for local production.

Retailers and wholesalers are not left out in this harsh situation.

According to the Director General of Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, with the borders’ closure, the country’s production capacity utilisation could fall to an all-time low, with mass closure of industries, downsizing of workers and high inventory of unsold goods.

Ajayi-Kadir noted that Nigeria’s manufacturing sector’s core business is all about import and export of goods and raw materials, adding that these are the areas that sustain the country’s local manufacturers that are into production of goods and service.

He said the fate of many manufacturers was gloomy, stating that the worst hit was the SMEs.

According to him, export of local goods contributes about 80 percent profit to local manufacturers that are into production of goods, adding that being in production is not only to serve the local market, but also to export to boost revenue profile.

The MAN director general noted that the policy would be the last straw as doing business in the country had been turbulent.