Nigeria’s economic headwinds have taken a severe toll on small businesses, with the Association of Small Business Owners of Nigeria (ASBON) sounding the alarm on the dire situation faced by entrepreneurs in the country.
In an exclusive interview with SaharaReporters, ASBON’s National President, Mr. Femi Egbesola, painted a grim picture of the devastating effects of the economic policies implemented under former President Muhammadu Buhari and President Bola Tinubu’s administrations.
Egbesola revealed that from January 2023 to June 2024, a staggering 20% of businesses in Nigeria were forced to shut down, a development he attributes to the harsh economic policies that have compounded challenges for small businesses. With Nigeria having an estimated 40 million small businesses, the closure of 20% amounts to approximately 8 million businesses ceasing operations during this period.
The human cost of these shutdowns is even more alarming, as Egbesola explained that many business owners have succumbed to the pressure of failing enterprises and unmet loan obligations.
“Many persons have died from shutting their businesses,” Egbesola stated. “Some could not fulfil their loan obligations, so they died from the pressure. Others are in the hospital as of now.”
The economic crisis gripping Nigeria has not only forced businesses to close but also led to mass downsizing in those still operational. Egbesola’s personal experience underscores the scale of the problem.
“I used to have 52 workers but now I have only 14,” he shared, highlighting how widespread downsizing has become due to the economic hardship. This contraction of the workforce adds to the unemployment crisis, further destabilizing the country’s economic fabric.
Egbesola emphasized the role that small businesses play in Nigeria’s economy, stating that they account for 86% of the country’s workforce. With small-scale businesses being the highest employers of labor, the ongoing closures present a significant threat to the livelihoods of millions of Nigerians. He urged the government to declare a state of emergency on the economy to prevent further damage.
“A state of economy should be declared as we are the highest employer of labour,” Egbesola urged. “You can imagine what happens when small businesses cannot survive.”
The broader economic climate in Nigeria has been deteriorating, with inflation continuing to rise and further straining the financial health of both businesses and consumers. The hike in petrol prices, which have reached as high as N1,200 per liter in some parts of the country, has compounded the cost of living and doing business, particularly affecting sectors reliant on transportation and energy.
Small business owners in Nigeria have long been at the mercy of economic instability, and the situation has only worsened in recent years. Under the Buhari administration, the country faced two recessions and a continuous rise in inflation, which eroded the purchasing power of consumers and increased operational costs for businesses. Policies that failed to address the fundamental challenges faced by small enterprises, such as access to credit and affordable energy, left many struggling to stay afloat.
The current administration of President Bola Tinubu has yet to provide relief to small businesses, as policies aimed at stabilizing the economy have yet to bear fruit. While Tinubu’s government inherited a host of economic problems, compounded by his own policies, such as the removal of fuel subsidies and ongoing currency devaluation, the lack of immediate and targeted interventions has exacerbated the situation for small business owners. The consequences are evident in the widespread business closures and downsizing reported across the country.
Big Businesses Too
The economic turbulence in Nigeria has not only crippled small businesses but has also significantly impacted large corporations, including multinationals. The mass exodus of multinationals from the country has been a glaring consequence of these economic challenges since 2015, underscoring the broader implications of Nigeria’s economic policies on its business environment.
Nigeria’s escalating inflation, foreign exchange volatility, insecurity, and policy unpredictability have contributed to making the business climate increasingly hostile for many global companies. Multinational corporations, once thriving in Africa’s largest economy, have found it difficult to navigate the harsh economic landscape and began to pull out of the country en masse.
One of the most notable examples is the departure of Shoprite, the South African retail giant, which announced its exit from Nigeria in 2020 after 15 years of operations. Shoprite’s decision to leave was largely due to difficulties repatriating profits caused by dollar shortages, heightened inflation, and the overall tough economic climate.
Similarly, Mr Price, another South African retailer, exited Nigeria in 2020, citing the country’s volatile economic conditions, forex liquidity issues, and increasing costs as key factors behind its exit. The retailer struggled with reduced consumer spending and supply chain disruptions that were further worsened by the recession and inflationary pressures.
PZ Cussons, the British multinational known for its personal care and home care products, drastically scaled down its operations in Nigeria in 2019 due to persistent foreign exchange issues, rising operating costs, and slow consumer demand. Although the company retained a footprint in Nigeria, it significantly reduced its presence, citing economic headwinds and security concerns as major obstacles.
Other big names, like Etisalat (now 9mobile) and HSBC, also made the decision to exit or drastically downsize their operations. Etisalat faced financial distress in 2017, eventually transferring its ownership to 9mobile after defaulting on a $1.2 billion loan due to the weak economy. HSBC, one of the world’s largest banking groups, closed its representative office in Nigeria in 2018, citing adverse economic conditions as the primary reason.
The oil and gas sector, too, has seen a significant pullback from multinational oil companies such as ExxonMobil and Shell. Both companies have scaled down their operations in Nigeria due to regulatory uncertainties, oil theft, pipeline sabotage, and rising production costs.
These exits have sent shockwaves through the Nigerian economy, leading to increased unemployment and reduced foreign direct investment. The situation has further aggravated Nigeria’s dollar shortages, as these corporations previously contributed substantial foreign exchange inflows. For small businesses, the departure of these multinationals has had cascading effects, as many smaller firms were dependent on the supply chains and operations of these larger entities.
In light of the severity of the situation, experts have called for immediate government intervention to prevent further damage to the small business sector. A state of emergency on the economy, as suggested by Egbesola, could pave the way for more aggressive and targeted measures to support small businesses. Economists have noted that the survival of this critical sector is essential not only for job creation but also for the stability of the economy as a whole.
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