5 ways the 2017 budget affects small scale businesses in Nigeria
We once again look at how the 2017 Budget proposal affects small to medium enterprises.
Last year, the 2016 budget called “The budget of change“ was focused on setting Nigeria on a path of sustainable growth by fighting corruption, boosting national security, diversifying the economy & creating jobs. The 2017 budget called “The budget of recovery and growth” is focused on an Economic Recovery and Growth Strategy – “bringing the economy out of recession and to a path of steady growth and prosperity.”
We picked out several points that we thought will be be advantageous to small and medium enterprises in Nigeria.
Increase the ease of doing business
“The underlying philosophy of our Economic Recovery and Growth Plan is optimizing the use of local content and empowering local businesses. The role of Government must be to facilitate, enable and support the economic activities of the Nigerian businesses…”
“I have established the Presidential Enabling Business Council, chaired by the Vice President with a mandate to make doing business in Nigeria easier and more attractive. Getting approvals for business and procurements will be simplified and made faster.”
This should always be the main priorities for governments in regards to its private sector – make it easy for businesses and entrepreneurs to be successful. Reduce the number of steps it takes to start a business and reduce the bureaucracy that increases the time it takes for businesses to get its products to its customer.
“In 2017, we will focus on the rapid development of infrastructure, especially rail, roads and power. Efforts to fast-track the modernization of our railway system is a priority in the 2017 Budget.”
“Efforts to fast-track the modernization of our railway system will receive further boost through the allocation of N213.14 billion as counterpart funding for the Lagos-Kano, Calabar-Lagos, AjaokutaItakpe-Warri railway, and Kaduna-Abuja railway projects. “
The improved rail infrastructure and road networks will improve the distribution of products around the country. This can reduce the logistics cost that businesses have to bear as they move their products around – from vendors to customers.
Access to capital
“Our small- and medium-scale businesses continue to face difficulties in accessing longer term and more affordable credit. To address this situation, a sum of N15 billion has been provided for the recapitalization of the Bank of Industry and the Bank of Agriculture. In addition, the Development Bank of Nigeria will soon start operations with US$1.3 billion focused exclusively on Small and Medium-Sized Enterprises.”
It’s good to see some numbers here, so that the government can be held accountable at the end of the year. One of the main bottlenecks for businesses is access to capital. These institutions, if properly utilized can provide access to capital for small and medium businesses.
This generation has an opportunity to move our country from an unsustainable growth model – one that is largely dependent on oil earnings and imports, to an economy that focuses on using local labour and local raw materials. We cannot afford to let this opportunity slip by. We must all put our differences aside and work together to make this country succeed. The people that voted us into these esteemed positions are looking to us to make a difference. ~ President Buhari
Diversification – focus on agriculture, manufacturing and other industries
“Let it not be lost on anyone that the true drivers of our economic future will be the farmers, small and medium sized manufacturers, agro-allied businesses, dressmakers, entertainers and technology start-ups.They are the engine of our imminent economic recovery. And their needs underpin the Economic Recovery and Growth Plan.”
“By this simple principle, we will increasingly grow and process our own food, we will manufacture what we can and refine our own petroleum products. We will buy ‘Made in Nigeria’ goods. We will encourage garment manufacturing and Nigerian designers, tailors and fashion retailers. We will patronize local entrepreneurs. We will promote the manufacturing powerhouses in Aba, Calabar, Kaduna, Kano, Lagos, Nnewi, Onitsha, and Ota. From light manufacturing to cement production and petrochemicals, our objective is to make Nigeria a new manufacturing hub.”
The diversification on the Nigerian economy continues in 2017. The federal government is sticking to its effort to expand the non-oil sector. This is good news for businesses that are in these industries. If the government can make it easier for businesses in these industries to start, grow and remain competitive, it will have a great impact on the Nigerian economy currently and more importantly in the long term.
“…We will prioritise (sic) investments in human capital development especially in education and health, as well as wider social inclusion through job creation, public works and social investments.”
“Government realizes that achieving its goals with regard to job creation, also requires improving the skills of our labour force, especially young people. We have accordingly made provision, including working with the private sector and State Governments, to establish and operate model technical and vocational education institutes.”
Another big issue that business owners in Nigeria face is hiring well-trained staff. It is good to see that the government is aware of the importance of training and developing skilled labor. However, what is unclear are the specific programs that will be executed to achieve these goals.
What we would have liked to see
So there it is – the 2017 Nigeria budget proposal. Here is a cool quantitative breakdown of the total budget. One of the issues that was not thoroughly addressed was how the government is going to stabilize a rapidly increasing exchange rate and the fact that there are two or three exchange rates. The exchange rate is something that is really affecting business owners in all industries – whether it’s paying their suppliers, or getting good rates at the bank or facing the risk of making a loss from imports. The only time that the exchange rate is referenced in the budget is when the “official” rate was used to estimate the total revenue projections for the year. We will have liked to see some more concrete plans on how to tackle the actual issue small business owners face with the multiple and rising exchange rates.
We will love to hear about how the current economic climate is affecting your business and what you think about the 2017 budget in regards to your business. Write your opinion below.