Operators of Small and Medium Enterprises say that the goal of expanding their businesses is becoming less feasible due to the hostile economic environment, especially the foreign exchange crisis, which is hitting import-reliant industries particularly hard.

Business expansion dreams look less likely for industry players as Nigeria’s Gross Domestic Product which grew by 3.19 per cent in the second quarter of 2024, up from 2.51 per cent in Q2 2023, still suffers from the risk of inflation.

According to the National Bureau of Statistics, inflation has surged to 32.70 per cent and compounded with naira devaluation and high borrowing costs, small businesses which make for more than 80 per cent of the labour force are stuck without expansion in sight.

The National Vice President of the National Association of Small-Scale Industrialists, Segun Kuti-George, in a conversation with The PUNCH, highlighted how increasing input costs have driven many businesses to the brink of closure.

“The economic situation is currently hostile to businesses because the cost of input is going up every day,” Kuti-George said. “A lot of businesses are closing shop. The first thing we should be looking at is survival.”

He noted that businesses can survive and potentially expand by embracing innovation and diversification.

According to the NASSI Vice President, “For any business to continue to exist and expand under the current situation, it has to be innovative,” citing Samsung’s evolution from tomato farming to electronics manufacturing as an example of successful diversification.

He stressed that businesses could explore new products in related or entirely different areas to create alternative revenue streams.

Industries with expansion potential, Kuti-George said, include agriculture, agro-processing, and technology.

For instance, a beverage producer might diversify into water production, using existing resources to minimise additional costs. “You just look for products that won’t require so much investment for you to be able to produce,” he explained.

Kuti-George also advised businesses to consider exporting, particularly under the African Continental Free Trade Area, as Africa presents growth opportunities with demand for Nigerian products.

Additionally, he emphasised the importance of embracing technology and automation to reduce operational costs and increase output.

Similarly, the Director of the Nigerian Association of Small and Medium Enterprises, Eke Ubiji, pointed out that forex volatility is a significant barrier to expansion, especially for businesses that depend heavily on imports.

“Only businesses that forex does not disrupt so much are more likely to expand,” Ubiji said.

He added that companies that source raw materials locally and produce goods in high local demand stand the best chance.

Ubiji cited the success of Nigeria’s homegrown automobile manufacturer, Innoson, which has thrived by catering to government agencies and local buyers who would otherwise face high costs for imported vehicles.

The NASME director noted, “Because Innoson produces his vehicles locally, they are moving in the market. By the way, a lot of government agencies and companies are buying from Innoson.”

However, big businesses like Innoson are better placed to access capital and creditworthiness, than small businesses raising a challenge.

Ubiji addressed funding for small businesses and mentioned that banks and financial institutions who monitor market trends are likely to support businesses with viable expansion plans.

The PUNCH spoke with an industry expert, the CEO of Made-in-Africa Brand Ambassador, Flora Mbeledeogu, who explained the importance of understanding target markets and conducting feasibility studies before expanding.

“You don’t just hear, ‘Oh, it’ll be nice to have my product in Ghana,’ and just rush off,” Mbeledeogu said, stressing the need for in-depth market research to identify competition and fit.

She urged small businesses to look out for people in their sectors and learn how they expanded into any country and leverage their experience to move into those areas.