Stakeholders cautiously optimistic amid positive forecast for MSMEs

Small businesses are caught between approaching 2025 with optimistic projections and staying alert to the persistence of last year’s economic challenges. ARINZE NWAFOR writes

Stakeholders in the micro, small, and medium enterprises sector are uncertain about the economic future in 2025. The economy presents a contrasting picture; it promises stability, but that is not the experience of most small businesses that seek increased sales and other economic reliefs.

December 2024 saw a slight uptick in the Purchasing Managers Index, which briefly surpassed the 50-point threshold, indicating a marginal recovery in production and spending. The private welcomed this development even when they acknowledged its transience.

In an earlier report, Stanbic IBTC Bank compiled responses to questionnaires sent to purchasing managers in a panel of about 400 private sector companies, resulting in Nigeria’s PMI.

The PUNCH reported the lender found “a second successive increase in new orders and renewed expansions in output, employment, and purchasing. In December, the headline PMI moved back above the 50.0 no-change mark for the first time in six months. At 52.7, the index was up from 49.6 in November and signalled a solid improvement in the health of the private sector, which was the most pronounced since January 2024.

“Usually, PMI readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration.”

Operators have debated the above 50 no-change mark PMI sustainability into the year for small businesses, arguing the MSMEs do not feel any lingering effects of the improved sales from the yuletide.

Some forecasts are cautiously optimistic

There are varying publicly available economic outlook statements. Some analysts predicted stability and reduced inflation, while others advised continued financial prudence.

Director of the Centre for Promotion of Private Enterprise, Dr. Muda Yusuf, in an earlier statement, forecasted that “monetary conditions may remain tight in 2025” and that there was a “risk of elevated fiscal deficit and its inflationary implications.”

Yusuf predicted a “moderately positive” outlook for the energy sector thanks to the active petroleum refineries but warned that an “electricity pricing conundrum would remain a tricky issue in 2025.”

He advised businesses to formulate strategies for managing foreign exchange, interest rates, inflation, financial and monetary policy, regulatory issues, cybersecurity, insecurity, and political risks.

Meanwhile, President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, in his New Year message, forecasted the outlook for business growth in 2025 appears cautiously optimistic.

Idahosa said, “Looking ahead to 2025, the outlook appears cautiously optimistic, with Gross Domestic Product growth projected to accelerate upward, contingent on sustained policy reforms, improved oil sector output, and investments in infrastructure.

“Enhanced public-private partnerships and efforts to bolster economic diversification remain pivotal to achieving inclusive and sustainable growth.”

These 2025 outlooks also go into detail for major sectoral groups, including agriculture, real estate, oil and gas, and manufacturing.

NASME insists projections are not realistic

The PUNCH learnt about the present concerns and market projections of MSMEs in separate phone interviews with small business stakeholders, including the Director-General of the Nigerian Association of Small and Medium Enterprises, Eke Ubiji, who disagreed with suggestions that small businesses were experiencing an upward trajectory against the backdrop of the December PMI figure.

“Purchasing power is still very low,” Ubiji said. “(Purchasing power increase) wasn’t much. Rather, we noticed people had to make some serious rational choices. By serious rational choices I mean that if there are things that you have alternatives to procure, you discard the one that you are used to, with a higher cost, and go for the other one with a lower price.

“That’s a serious rational choice to make. That was what happened. Those (items that the buyers) could avoid totally, they avoided them because of the high cost of purchase. That is what has been happening up until now. People are very, very selective.”

The NASME president argued this ‘rational choice/selective’ behaviour of consumers, especially through sachetisation, pervaded the holiday sales, leading to an implied rise in purchasing capacity.

“Some people in their homes have discarded some products for now because of their high costs. For example, before, some families used to buy a sizable tin of Milo (chocolate beverage), not even the big one, which is a no-go area, but people have decided to go for the sachet ones,” he explained. “And even that sachet (Milo beverage) used to go for N50 or N100. But (presently) this small sachet is about N200 to N250. How many average Nigerians buy that? Some will even discard tea (beverages) as a menu.”

NASME’s DG weighed in on the direction of small business growth relative to International Monetary Fund projections for Nigeria’s GDP growth in 2025 at 3.2 per cent.

He stated, “The economy is not in good shape. And the feelers we get all over show that the economy is not moving well. Money is not easy to come by, and there is a rising cost of commodities.”

For Ubiji, the lingering economic challenges are rooted in the rising cost of living and inconsistent policies: “Before the removal of fuel subsidies, was the economy so bad like this? No,” he remarked. “You can confidently predict that the economy will run like this or like that, and it will fall in line. But with the removal of fuel subsidies, they have affected almost everything, everything. When I say everything, I mean it in all ramifications.

“So, it’s not easy to maintain steady economic growth. Some of them may be making academic guesses or predictions, but it’s not realistic. Those of us who relate to small businesses feel their pains. I hear them lament.”

According to the NASME boss, the subsidy removal has had ripple effects on virtually all sectors, making it harder for businesses to plan or sustain growth.

“Even these local women who go to market with N10,000 realise they’re not buying anything tangible,” he added.

Ubiji was doubtful about the ability of seasonal economic activities, like the yuletide spending spree, to translate into sustained growth.

“From the signs I’m seeing, it’s not likely to happen that way,” he said.

Moreover, he expressed hope that the renewed operations of Nigeria’s refineries would translate to better growth trajectories for small businesses, stressing, “Yes, (growth) is foreseeable, but you will know when you begin to see the signs.”

ASBON anchors optimistic projection on policy

On the other end, the President of the Association of Small Business Owners of Nigeria, Dr. Femi Egbesola, expressed cautious optimism about the projections and capacity of MSMEs.

He cited a December 2024 report by the State of Entrepreneurship and indicated that 76 per cent of MSMEs are hopeful about 2025. This optimism, according to Egbesola, stems from several government policies aimed at revitalising the small business sector.

He explained that government initiatives, such as the proposed Nigeria Tax Reforms Bill and the N200bn Presidential Intervention Fund, could provide the much-needed lifeline for MSMEs.

“The tax Bill is good because those who turn over less than N50m will be exempted from taxes,” he explained, noting that 87 per cent of MSMEs fall within this category.

The ASBON president added, “Another policy is the (N200bn Presidential) Intervention Fund made available by the Federal Government, whereby an MSME can access up to N5m; the application can be done online, and since it is a single-digit interest rate (nine per cent) and without collateral for three years, I think it will also improve the liquidity of the institution.

“We have the Startup Act, whereby start-ups can have access to some form of funding at a single-digit (interest rate) to incentivise the start-up sector, which is a major part of what’s going on in the MSME sector. We have also seen a lot of organisations, both locally and internationally, now interested in the MSME sector than ever before. They are coming in with a lot of interventions in some capacity.

“Another wonderful policy coming on board is this credit guarantee scheme or system whereby we can now have a credit guarantee for loans instead of looking for tangible collateral.”

Similar to Ubiji, Egbesola agreed that infrastructure remains a critical factor in determining the future of small businesses. While Ubiji had noted the slow impact of the marginal drop in fuel price to N950, he was optimistic about recent efforts to liberalise electricity supply.

“We have one major challenge: electricity,” he stressed. “It takes up about 40 per cent of our expenses, but this time, we now have a lot of diversifications in that corridor. Many of us are now shifting to gas; electricity powered by gas is done by private initiatives based on the policy whereby electricity is now being liberalised.

“We now have pockets of investors coming in to generate their electricity, particularly in industrial areas, and to supply us with uninterrupted, cheaper, cleaner, and better electricity that helps our production line and our businesses.”

Another area of divergence is the outlook on exports and currency stability. Egbesola remarked the government’s export-orientated policies are a step in the right direction, noting, “If we’re able to export a bit more, we’ll enhance foreign exchange, which will stabilise our businesses.”

Egbesola also hailed recent personnel development, especially the cabinet reshuffle by President Bola Tinubu, noting, “The government is putting round pegs in round holes. A case in question is the last cabinet reshuffle. People like the new Minister for Trade, Industry, and Investment, Dr. Jumoke Oduwole, who has been in that sector for almost 20 years before becoming minister; a minister who understands the workings of the MSMEs and can provide a workable solution because she has been in that sector for a long time.

“You can also see the Fiscal and Tax Reform Committee, which will reform not just the taxes but many of our fiscal policies. For the first time, we are having a youth minister, a 35-year-old man who is a youth minister. It is happening for the first time in Nigeria.”

He emphasised that the recent stability in the naira’s exchange rate is encouraging to small business owners who need to project. “When we’re able to project well, it will encourage investors to come in,” he added.

Egbesola expressed greater optimism in the face of existing challenges for MSMEs, noting the resilience of operators in the sector as a foundation for future growth. “The majority of us are hopeful that 2025 will be better than 2024.”

Small business resilience wins

The economic trends of small businesses will be defined by resilience, as expressed by the stakeholders. According to the National Bureau of Statistics, the December inflation rate rose to 34.80 per cent, chiefly due to food inflation and Yuletide spending. Skyrocketing inflation hurts MSMEs, as do high operating costs and inconsistent policies.

However, well-thought-out and implemented government interventions, infrastructure development, and a more stable currency offer a roadmap for recovery. The resilience and adaptability of small businesses will undoubtedly play a crucial role in shaping MSMEs’ trajectory in 2025.