Government Urged to Support SMEs

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Obinna Chima

With the Nigerian economy in a recession, support for small and medium scale enterprises (SMEs) could be one of the key ingredients to carrying the country through these tough times.

Assisting them should become a priority for big businesses and the government. That was the submission of the Regional Director for Sage in West Africa,Magnus Nmonwu, who noted that small and medium scale businesses in Nigeria face challenging times, even as the economy slides.

In addition to the country entering a recession – defined as a decline in GDP over two consecutive quarters – the upcoming Communication Service Tax Bill could also affect Nigerian businesses. Yet Nigerian businesses and entrepreneurs are creative and resilient – and might play an instrumental role in lifting the economy out of recession, given the right support and business environment.

“Nigerian entrepreneurs and business owners are the engines that drive the country’s economy,” Nmonwu added.
“During recessions, big companies are able to adjust by downsizing and cutting costs. Small businesses, however, keep going and carry the losses. They need our support, as they can contribute to turning the economy around, far more quickly.

“It is important that government and other stakeholders listen to entrepreneurs’ concerns as they seek to grow and contribute to the economy. We have embraced the responsibility of helping to amplify the voice of small business, because we also started small and understand the challenges entrepreneurs of small face in such times.”

With the recession biting, small and medium businesses face the reality that consumers won’t have as much money to spend and that investors and business partners will taper down investment. Given that Nigeria has an estimated 37 million micro, small, and medium-size enterprises making a significant contribution to GDP and employment, this sector should be treated as an economic priority, Nmonwu stated.

Another concern on the horizon is the looming Communication Service Tax Bill 2015, which is currently with the National Assembly. If passed into law, the law will require that consumers of voice, data, SMS, MMS and pay TV services pay a nine per cent tax on their tariffs for using these services.

This is in addition to other taxes people already pay for mobile and Internet access – five per cent VAT, 12 per cent import duties on ICT devices, and 20 per cent tax levied on SIM cards, amongst the series of taxes. The Alliance for Affordable Internet, Nigeria Coalition, estimates that the tax could prevent more than 50 million Nigerians from affording a basic broadband connection.

“Nigerian entrepreneurs depend on their mobile phones and the Internet to run their businesses,” Nmonwu said, adding that: “The tax could potentially raise the cost of doing business and hold back Nigeria’s integration into the global digital economy by excluding people from broadband access.”

Furthermore, Nmonwu stated that it was understandable that the government needs to raise new tax revenues in the wake of falling commodity prices. However, this should ideally be done in a way that nurtures the growth of the SMEs, technology and services sectors – especially at a time Nigeria needs to diversify its economy beyond oil.