How MSMEs can help curb inflation in Nigeria
Inflation generally refers to a rapid increase in the general price of goods and services over a certain period of time. Inflation in Nigeria has doubled since 2016 reaching 17.33% in 2021. The current Covid-19 pandemic has contributed greatly to the recent spike, as oil prices plunged leading to reduced profits in export. These reduced exports have been met with increasing imports over the months leading to imported inflation.
Imported inflation is induced by heavy dependence on imported products. When there are more imports than exports, it simply means there is a rise in the price of the dollar against the Naira. Micro, Small, and Medium Enterprises (MSMEs) are at the forefront of these negative impacts because when prices rise, their expenses increase, diminishing profits. As a result, Nigerian businesses have been left with no option other than to pass down the increases in marginal costs of production to their consumers in form of price increases on perishable and non-perishable consumer goods. The best way to cut down on this kind of inflation is to reduce excessive consumption of imported goods and favour locally produced items that can be produced at a less exorbitant cost.
Yet MSMEs face technological deficiencies, marketing issues and increasing competition. In order to overcome these issues and produce more locally, MSMEs need funding to be able to expand and adopt innovative approaches in their operations. According to the National Bureau of Statistics (NBS), 55% to 68% of MSMEs are either not served or not adequately served by financial institutions. Barely 5% of SMEs have been able to get funding to meet their day-to-day obligations, much less, expansion.
This is where Advans comes in. We aim to provide MSMEs the financing they need to fund their business operations and build their capacity to produce locally. With appropriate financing mechanisms, MSMEs are able to grow, adapt their operations and help to fight against the impact of inflation thereby creating a win-win situation for the suppliers and final consumers.