The President of the Association of Micro Enterprises of Nigeria (AMEN), Prince Saviour Iche has hinted that the sector may begin to downsize in the face of current economic downturn.
He said Small and Medium Enterprises (SMEs) are likely to cut jobs as part of cost saving measures.
According to him, With the depreciation of the naira, small businesses are experiencing a significant increase in running costs, especially with the increasing cost of raw materials.
He observed that most businesses have higher running costs that are having negative impact on cash flows.
Iche said the increase in the prices of raw materials makes finished products less competitive.
For instance, he said one of the raw materials being used by one of his members previously sold for N18, 000, but has risen to N35,000.
With many SMEs unable to pass on their cost increases to consumers, they are being forced to look for ways to reduce their operational costs which would require reducing staff.
While demand for finance is rising, Iche said SMEs are failing to get the funding they need from their banks. This is crucial given SMEs constitute over 90 per cent of all firms and account for approximately 70 per cent of employment.
He said the priority area of banks should be SMEs, adding that it is the entrepreneurs in SMEs, many of them in unorganised sector, who form the backbone of the economy.
According to him, SMEs are concerned that the increased regulatory pressure will force them to reconsider and to err on the side of caution, when choosing the markets and sectors in which to operate.
Iche stressed that more needs to be done to help SMEs perform at full capacity. Although they have been extended gestures of assistance, such as Central Bank of Nigeria (CBN) and Bank of Industry (BoI) funding programmes for small businesses, he said more needs to be done to ensure that they see their portion of funding.