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How SMEs are coping with the cost of doing business crisis –

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As Nigeria faces a new crisis in the cost of doing business, many of the country’s 41.5 million small and medium-sized enterprises (SMEs) are adapting to survive today’s business realities.

Production costs have more than doubled for businesses in Africa’s biggest economy since Russia invaded Ukraine in February amid currency shortages and worsening insecurity.

BusinessDay, in its usual fashion, interviewed some entrepreneurs who shared how they are coping with the recent spike in diesel prices and input costs. And here are their answers:

Paul Akingbola

Akingbola is CEO of Protransl8, a translation agency, and co-founder of Transcript dot NG, a technology startup.

How do you cope with rising input costs?

I believe that there is almost nothing that individuals can cope with the rising cost of entry. At best, we can only find ways to lessen the severity of its impact on our business. I often see things from a half-full state of mind. That way, instead of lamenting what isn’t working, I focus on the part that is working.

A major coping mechanism that comes to mind was to start charging in dollars. That way, whatever happens to the naira doesn’t have much of an impact on my thoughts. We also continue to review our business plans and strategy to ensure alignment with the realities of the operating environment.

Do you earn much more money than before?

For events, yes, because there are more and more daily events. Nor have we restarted the backlog of events from the Covid-19 lockdown. With organizing events being one of my thoughts, I see that there is so much money on the table in the event industry. This is why I often say that event money is sweet. That’s why I also advocated for many more people to join the industry.

For Transcript point NG, activities have been stalled for months due to strike actions by ASUU and NASU as public higher education institutions have been closed. And these happen to be a majority market. No way to get transcripts for students resulting in loss of income. We also had to stall the application process to avoid stacks and backlogs.

Are people buying your products?

We do not sell tangible products. I think the second answer can solve this problem. But for Transcript point NG, people want to buy; because more and more alumni want their transcripts out of the Alma Mater. But we cannot sell because the schools have been closed for several months. Well, everything is opening up now and it can only get better. We also hope that NASU will not resume the strike, as the halting/resumption of the strike was meant to be temporary.

How does deteriorating power supply affect your cost of production?

Not Applicable.

What strategy have you adopted as a business to survive the covid-19 pandemic and how are you managing the cost of the business crisis?

The main strategies were also to stay safe. For the costs of doing crisis business, we fell back on our savings, reduced our budget and expenses, and finally, we focused on more important things to deal with.

Is the Nigerian business environment improving?

Anyone who answers yes to this question will be a liar. The sad answer is no. But then, we Nigerians are honest, so incredibly resilient. Thus, businessmen or women and entrepreneurs are those who are getting stronger in the face of the hardening of the business environment.

Gladys Bosu

Bosu is the founder of Gladyskitchen – a catering company that operates in Lagos, Ogun and Oyo states.

How do you cope with rising input prices?

I don’t think I have a choice when it comes to dealing with rising production costs. I have to find a way or another to adapt to the economy. For my part, a small increase in the price of my products is what I sought.

For example, I usually sell a bowl of soup for N7000 before, however, I increased it to N9000. For my cakes, I increased each size by N1500.

Do you earn much more money than before?

Am I making more money? No. It’s because the things we get for a given price back then are four times as much now. Record inflation and the exchange rate are limiting my company’s investments.

With higher investment, we don’t even catch up the old profit we made.

Are customers buying your products?

Despite the unbearable Nigerian economy, my local customers continue to buy my products.

How does deteriorating power supply affect your cost of production?

In my area, Ipaja, Lagos, poor power supply is affecting my business productivity as I stick to a gasoline generator. The more stable the power, the more profit I can make, compared to using a generator.

Also Read: How Nigerians are coping with the rising cost of living

What strategy have you adopted as a business to survive the covid-19 pandemic and how are you managing the cost of the business crisis?

When supplying my products to my customers, I had to ensure that social distancing and the use of nose marks are used by the people supplying the products, so that my customers do not shrink. It helped through the pandemic era.

For the cost of the business crisis, we are cutting our budgets and prioritizing our spending.

Is the Nigerian business environment improving?

I don’t think doing business in Nigeria is getting better because inflation keeps going up. This development demotivates business leaders, especially start-ups.

Sharon Samo

Samo is the founder of Adetutu brand – a clothing brand that manufactures women’s clothing, operating in the metropolis of Lagos.

How do you cope with rising input prices?

The current inflation has affected our production efficiency. The materials are more expensive, which makes it difficult to purchase them in large quantities. Materials that were once 1000N per meter are now sold at 1500N per meter. This leads us to use lower quality materials that are more affordable.

Do you earn much more money than before?

No. We don’t make money compared to before because of the high cost of production. Most of the time, we end up with little or no profit.

Are customers buying your products?

When it comes to sales, the situation is frustrating. Inflation has affected both our business and our customers. The increase in production expenses forced us to increase the price of our products.

Unfortunately, most of our customers end up leaving because they can’t afford to buy my products.

How does deteriorating power supply affect your cost of production?

The poor power supply affects our production costs, because as a fashion brand, we use a lot of electronics like sewing machines, iron and weaving machines, among others. However, we have no choice but to use our gasoline generator, which is another expense.

What strategy have you adopted as a business to survive the covid-19 pandemic and how are you managing the cost of the business crisis?

Luckily for me, my business started after the covid-19 pandemic. For the cost of business crisis, we source locally now and reduce costs.

Is the Nigerian business environment improving?

In my opinion, I don’t think the Nigerian business environment is improving, as there are different factors that negatively affect business growth in Nigeria, such as foreign exchange, inflation, unstable light, and financing.

Ugah Chukwuemeka

Chukwuemeka is the Executive Director of Legacy Building Solutions, an aluminum composite panel supplier, operating in Ibadan, Oyo State.

How do you cope with rising input prices?

The current cost of doing business is as difficult as getting started. Last year, we experienced four price increases from our suppliers. This has created some pressure on our finances and reduced our profit margin since we have to add cash to redeem.

In order to manage these regular price increases, we are more vigilant in the market, follow economic trends and make a price increase when necessary.

Do you earn much more money than before?

Compared to last year, we are making around 40% less profit per asset.

Are customers buying your products?

At the moment, customers continue to patronize. They understand the general situation.

How does deteriorating power supply affect your cost of production?

Our business does not depend on the use of energy, as we only supply aluminum composite panels.

What strategy have you adopted as a business to survive the covid-19 pandemic and how are you managing the cost of the business crisis?

We mainly deal with supplies and we had to maintain a good relationship with our suppliers and the logistics company. Construction workers were still going, so customers needed goods. We have increased the prices of our products to meet the cost of the business crisis.

Is the Nigerian business environment improving?

The Nigerian business environment is deteriorating as many 2020 start-ups could not survive. It would take solid capital with a good business strategy to deal with now.