High interest rates toxic to SMEs, small business owners tell FG

The National Association of Small and Medium Enterprises (NASME) says rising operational costs and high interest rates are toxic to the performance of micro, small and medium enterprises (MSMEs).

Speaking in an interview with NAN on Thursday, John Karunwi, Oyo state chairman of NASME, attributed the poor performance of SMEs in 2024 to low purchasing power and the high cost of doing business.

He expressed optimism that 2025 would usher in more impactful government policies to alleviate the challenges small businesses face.

Karunwi acknowledged the government’s efforts to improve the economy in 2024 but said the results are yet to be visible.

The NASME chairman said many interventions, such as the Bank of Industry’s (BoI) single-digit loans, have not reached a significant portion of small businesses.

“The impact of the high monetary policy rate leading to high cost of funds along with outrageously high operation costs resulting from high cost of raw materials, high cost of energy, high logistics, and so on are toxic to sector performance,” Karunwi said.

“Also, regulatory bodies are still making the cost of doing business high.

“The low purchasing power of Nigerians also affects sales performance.

“In summary, the overall performance of the Micro, Small and Medium Enterprise sub-sector did not improve significantly in 2024.”

Karunwi asked the government to implement policies that would create a better business environment, reduce operational costs, and improve access to energy and raw materials.

“We look forward to the government coming up with programmes that can make impacts and bring relief to the SMEs in a short time,” he said.

“We also look forward to better business environments and policies that will have direct impacts on SMEs as well as reduce cost of doing business.

“We look for improvement in the energy sector, improved access to raw materials at the rate that would bring reduction in our production cost and make our businesses competitive.

“We look forward to economic policies that will revive comatose MSMEs.”

On October 5, 2023, Vice-President Kashim Shettima said the federal government would support local manufacturers with N75 billion in a bid to bolster the manufacturing sector.

The vice-president said the N75 billion would support 100,000 startups and MSMEs at single-digit interest rates.

The federal government, on April 22, 2024, said it had commenced the loan disbursement process for MSMEs and the manufacturing sector.

According to the government, the initiative is aimed at boosting economic growth and industrial development.

On October 3, 2024, the BoI unveiled the N75 billion loan scheme for MSMEs, providing up to N1 million in single-digit interest loans for businesses in the category.