Small businesses battle shutdown as inflation bites harder

Abubakar Adamu, a fruit seller in Abuja, has not sent even a dime to his family in Jigawa State in the last three weeks. Adamu lamented how inflation is crippling his business. The number of his customers has dropped. “Inflation has affected my business. Businesses are not moving, including this one. Demand is low now. […]

Abubakar Adamu, a fruit seller in Abuja, has not sent even a dime to his family in Jigawa State in the last three weeks.

Adamu lamented how inflation is crippling his business. The number of his customers has dropped.

“Inflation has affected my business. Businesses are not moving, including this one. Demand is low now.

“In the past N20,000 could buy 20 pieces of medium size watermelons. But now even N35,000 cannot buy that.  Very few customers can afford fruits. They are after food.

“Now I am only in this business to get something to buy food. We are just managing. For almost three weeks I have not sent even a dime to my family,” he said.

Adamu is one of the traders in Nigeria grappling with income shortfall since inflation hit rooftop in the country.

Inflation has been growing exponentially since the Tinubu administration introduced some economic and monetary policies including floating of naira.

In 2023, the figure averaged at 24.52 percent starting with 21.82 percent in January and peaking up at 28.92 percent in December.

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Fuel subsidy removal first impacted businesses across the country as transportation fares rose as soon as the Tinubu administration announced the removal, making the pump price of petrol jump up from N200 to more than N600 per litre.

The rising inflation in one way or the other also stemmed from devaluation of the naira as well as Nigeria’s heavy dependence on importation.

 

We’re reviving economy – FG

During an interview with Arise TV, Mohammed Idris, the Minister of Information and National Orientation, said the Tinubu administration is reviving the economy, following damage of several years.

He said, “You’re premising your argument on the fact this problem just started yesterday. The foundation of our economy had taken a beating a long time ago. The substructure of our national economy has been one that cannot hold a meaningful substructure on it.

“So, it is important that Nigerians recognise that the President and his team would have to go back to reset that and that is why from day one, he said, ‘Look, subsidy issue has to go’. He had to expect that there would be this pain, of course.”

 

Inflation beating us black and blue

Muhammad Hasnul-Basriyyu, a tailor and clothing materials dealer, is struggling to pay his workers who are mostly students in higher educational institutions.

He said that he had been counting losses since the exchange rate went berserk.

Hasnul-Basriyyu said, “The prices of most of the materials we use have increased by more than 50% because of naira devaluation and oil subsidy removal. I have stopped buying some materials because of the increase and we buy some materials in piecemeal. I don’t stock up any more. I can’t afford this.

“In fact, in many aspects of this business I have recorded losses. This is the reason I don’t buy plenty of materials now. Things we used to buy at N200,000 have now increased to N400,000.

“You know there is no way we can increase the price of our services when people are struggling for food. Of course there are still people that can afford to sew new clothes. Nothing will affect this category of people.”

He noted reduction in his income is one of the main challenges facing his business.

“Now we are not talking of saving, but what to eat. I struggle to pay most of my workers now,” he added.

He called on the government to consult economic experts who genuinely want to see the economy grow.

He said, “The government should come up with interventions which would reach the common man. People are suffering.”

Customers deserting us

Abubakar Nafiu DanMashi, another tailor, has lost many customers to the galloping inflation that erodes their incomes and prevents them from prioritising clothing.

“Inflation has largely affected me. Before, the type of thread we used to buy at N800 is now more than N1000. Customers would not add even a penny. This is the main problem. The price of every material we buy has increased.

“I had about 100 customers before the subsidy removal and naira devaluation. Some of them no longer even care to sew new clothes. Their attention is now totally on food,” he said.

Sagiru Ibrahim, a Kano-based grocer, said that inflation would force many grocers to close shops in the state.

According to him, prices rise on a daily basis and he is facing inadequate cash flow.

“For example, there is an increase of N1,000 on every box of Cherie Instant Noodles Chicken Pepper. The price keeps on increasing.

“Sometimes we get an increase of N3,000 on a 50kg bag of sugar in a day. Sometimes the profit is not more than N1,500 on every bag, and you have to add N5,000 to get a new one the following day.

“If you used N150,000 to stock up in the last few months, now N300,000 cannot do that,” he lamented.

Hudu Sani’s stall was as quiet as a graveyard.   The seller of Jallabiyas, caps and praying mats said that he sometimes spends the whole day without selling an item.

Sani said, “We are facing serious challenges. Dealers raise prices every day. They justify it with the volatile exchange rate, even though the goods may be an old supply. They hoard them.

“We have been counting losses. A N7,000 worth jallabiya now costs N8,000 and when we sell at N9,000 we get N500 or N700 profit.”

Hudu said that the number of his customers has dropped drastically.

“No customer has visited this stall since morning. This is to tell you how bad the market is. In the past I would have sold three or five items by now,” he recalled.

Hudu urged the government to investigate the exchange rate in the country, saying business owners are in a difficult situation.

Vegetable market is unfriendly, according to Umar Umar, a fruit seller who resides in Kubwa.

Umar, who also deals in yam, said that the price of the staple has kept going up for months now.

“Tubers of yam I bought for N100,000 now cause N120,000 or N130,000. A basket of tomatoes which cost N15,000 in the last two weeks now costs N30,000,” he added.

Hauwa Ibrahim, a seller of akara and millet porridge is weighed down by the increase in the prices of the ingredients.

“Prices of cooking oil, flour and beans have all gone up. A bottle of cooking oil cost N800 in the past. Now it costs N1,400. Price of Mudu of flour was N900 now it costs N1,400. A mudu of beans cost N750; but now it costs N1,500,” she explained.

Businesses at ‘shut down point’

Paul Alaje, an economist, said that food inflation is the major cause of the situation in the country.

According to him, the development is because of insecurity in some parts of the country.

He said, “Insecurity is one of the major causes. Farmers are not free to go to the farm. Some are kidnapped. Therefore it’s important for the government to combat insecurity or guarantee safety of lives and property of farmers for them to boost supply.

“When you look at our population and consumption pattern, you will realize that we need solutions beyond rice and meals. We need a solution that is comprehensive in nature.

“Medium and long term solution is what will make our economy sustainable. This means the government must be deliberate in going into plantation production and factories.”

Alaje added that any business owner who is unable to cover his or her variable cost is at ‘shut down point’.

He said, “For businesses that are facing hardship the economic flow is very clear. If you are unable to cover your variable cost it is shut down point. That cost if you are able to buy input, if you are not selling enough, if you are recording near zero revenue, you can’t cover your variable cost, let alone make profit. What will we do?

“This is a time for the government to reduce demand. What the government has done by removing oil subsidy and devaluing naira is to make households and firms the two other components in the national income line to pay more for consumption.

“Federal government allocation has gone from N600 billion to N1.6 trillion. But where is the gain? It is coming at infrastructure? Are state governors deliberately factoring SMEs so that they can stay afloat? The answer is no.”

Alaje called on the Tinubu administration to quickly come up with single digit loan programmes for business owners in the country.

“My recommendation is that the government should quickly run a programme for not just farmers and big businesses, but for all businesses to have a single digit loan so that they can stay afloat in this period. The president had in December 2023 promised to support businesses,” he added.