BLOG POST
Voices4MSMEs Project
By Mary Awoniyi
NOVEMBER 25, 2023
Economic inequality and bad governance are interconnected and reinforce each other in Nigeria?
With a 0.35% Gini Coefficient and over 133 million (out of about 200 million) Nigerians living in multidimensional poverty , the overlap between political and economic power has meant a severe inequality of opportunities, wealth and a biased policy-making culture in the country.
This level of poverty and lack is largely unconnected with the resource availability but connected to ill-use, misallocation and misappropriation of such resources, and the consequences of this current political inequality in the country are multifaceted.
The first consequence is the inability of government to effectively play its role as the key enabler for the economy. For instance, year-on-year inflation rate in Nigeria continued an upward swing for a sixth month to 24.08% in July 2023, the highest since September of 2005, compared to forecasts of 23.7%.
This inflation situation continues to stifle life out of existing MSMEs that are already disadvantaged by the poor business environment across states in the country.
Businesses are unable to make sales as inflation continues to hurt the purchasing power of consumers. For MSMEs in the productive sector, both input and output costs rose to their strongest in 9 years due to high and rising transportation costs, and increasingly weakened local currency.
Secondly, public resource management is defined by all manner of elite capture, corruption and rent seeking, at various tiers of government and therefore leaves millions of MSMEs vulnerable and exposes to all manner of economic shocks. Even while MSMEs contribute over 80% of employment in the economy, these businesses are disadvantaged in terms of access to funding that should enable their businesses weather through the storm of the dampening economic situation.
"A report by the International Trade Centre (ITC) shows that majority of Nigerian SMEs are so underfunded, that only 15% of SMEs are accessing formal credit. "
Government funding as a cushion for the failure of the financial market in this regard has either been non-existent or have been grossly corrupt.
Thirdly, the tax system in Nigeria has historically been largely regressive. Owing to their lack of voice, MSMEs have been consistently borne an unfairly larger brunt of the burden of taxation while big multinationals and large local businesses receive tax waivers and tax holidays, and exploit loopholes in tax laws to shift huge profits generated in the country to low tax jurisdictions .
In 2021, the Nigerian Customs Services was reported to have granted waivers worth 158% more than the revenue it collected . Nigeria is reported to be very notorious with the way it manages waivers with political elite capture being the key driver.
This project is the first of its kind in the history of Nigeria’s public-private sector engagement. We are aggregating the largely unorganized and voiceless MSMEs sector in Nigeria comprising of over 40 million operating business entities, under our public engagement platforms to provide one common front for confronting the myriad of challenges bedeviling especially those emanating from chronic government failures over the decades.
The three(3) pillars of interest are:
Government funding for MSMEs;
Government policies that affect MSMEs
Government programs that affect the operations and performance of MSMEs.
Project Objectives
Objective A: To improve the capability of MSMEs groups in Nigeria to demand more favorable public spending, programs and policies that positively affect their businesses.
Objective B: to develop a framework and plan for improved accountability among state governments for MSMEs development in Nigeria.
Published Date: November 25, 2023