Following the age-long challenge of obtaining funding faced by small businesses, PricewaterHouse Coopers (PwC) has said that Small and Medium Enterprises (SMEs) in Nigeria face an estimated N617.3 billion in funding gap annually and accounted for less than one percent of banks’ credit in 2018.

Mr. Esiri Agbeyi, Partner and Lead, Private Wealth Services, PwC Nigeria, stated this while presenting the result of a survey of Micro, Small and Medium scale Enterprises (MSMEs) in Nigeria conducted by the company. The report titled “PwC’s MSME Survey 2020- Building to last” revealed that apart from obtaining finance, finding customers and infrastructure deficits also accounted for top of the most pressing problems for small businesses, while generating electricity constituted the biggest cost to the MSMEs.

Presenting the results of the finding at a webinar hosted by the firm for MSMEs on Managing the Impact of COVID-19 and Repositioning Your Business for Growth, Agbeyi noted that obtaining finance (22%), finding customers (16%) and infrastructure deficits (15%) were identified by respondents as their most pressing problems. He said that 21 percent of the respondents identified electricity as being responsible for the highest cost to their daily operations, followed by rent (17%) and cost of capital and employee cost at 15 percent and 14 percent respectively.

He said:  “Access to finance, in particular credit, is a critical enabler for the growth and development of small and medium enterprises. The SME credit market, however, is notoriously characterised by market failures and imperfections. We estimate the financing gap for Nigerian MSMEs to be about N617.3 billion annually (pre-COVID-19 pandemic). More so, based on our analysis of data from the CBN annual statistical bulletin, small businesses accounted for less than 1% of total commercial banking credit in 2018.

We also see that electricity accounts for the biggest costs to daily operations of MSMEs. Nigeria’s power sector is overwhelmed by a myriad of challenges that have culminated in inadequate electricity supply. This has an adverse impact on the business environment in Nigeria; consequently, contributing to significant economic costs to SME and economic growth.

The International Monetary Fund (IMF) states that lack of access to reliable electricity costs the Nigerian economy an estimated USD29 billion a year.” 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. 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%.

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