By Onwubuke Melvin – A new Price Waterhouse Coopers report shows that up to 67 per cent of the country’s MSMEs have seen a fall in demand for their products over the last two years.
The report is a survey of over 500 Micro, Small, and Medium Enterprises (MSMEs) across 13 sectors of the economy with an annual sales turnover of N5 million or more.
According to the report released on Thursday, 38 per cent of MSMEs who observed a reduction in demand for their products ascribed it to high product costs, while another 36 per cent cited insufficient purchasing power and other factors.
It states: “67 cent of surveyed MSMEs reported that there has been a decrease in the demand for their products or services. When asked the reason for the decline, 38% attributed it to the high cost of their products and 36% reported that the low purchasing power of consumers was the major reason for the decline. Furthermore, while 12% reported that the decline was due to consumers switching to alternatives, 10% attributed it to changing consumer preferences.”
Furthermore, access to funding remains a challenge for MSMEs, with approximately 27 per cent reporting that high interest rates are the primary barrier preventing them from obtaining loans in the country.
In addition, 26 per cent of survey respondents claimed that too many procedures were the biggest hurdles, with 16 per cent citing insufficient collateral.
According to the report, the informal form of many MSMEs in Nigeria, particularly micro and small firms, contributes to problems such as insufficient collateral and inadequate documentation. These businesses are frequently perceived as too expensive and hazardous to serve.
Among the surveyed MSMEs, 33 per cent reported needing less than N500,000 for their most recent loan, 23 per cent received between N500,000 and N2 million ($1,182 and $4,728), and 21 per cent received loans greater than N2 million. The loan amounts suggest that most MSMEs operate on a smaller scale. 40% of respondents stated that they needed the loans largely for operating capital.
Consumer demand for MSMEs is likely to fall since inflation has risen over the last two years. Nigeria’s inflation has grown steadily since January 2023, hitting 34.19 per cent in July 2024, the highest in 28 years.
Rising interest rates have also hampered enterprises’ access to financing. The Central Bank of Nigeria has consistently raised the benchmark MPR since May 2022, reaching 26.75 per cent . In 2024 alone, the apex bank raised interest rates by 800 basis points.
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