Rising cost of doing business dampens SMEs’ optimism

List digital payment, easier access to credit as potential

By Adeyemi Adepetun

 Despite the unprecedented challenges experienced in the wake of the COVID-19 pandemic, Small and Medium Enterprises’ (SMEs) confidence in Nigeria is on the rise, according to the latest research by payments technology firm, Mastercard.

The inaugural Mastercard Middle East and Africa (MEA) SME Confidence Index found 81 per cent of SMEs in Nigeria optimistic about the next 12 months, compared to the regional average of 74 per cent in sub-Saharan Africa.

When asked about the main thing that keeps them up at night, 54 per cent of SMEs in Nigeria mentioned the challenge to maintain and grow their business as their top concern.

Looking at concerns over the next 12 months, 55 per cent identified the rising cost of doing business, while 53 per cent cited the need for easier access to capital and funding. Private sector partnerships (50 per cent) and government-led initiatives (52 per cent) were identified as having the biggest potential to positively impact SMEs and the country at large.

Looking ahead, 78 per cent of SMEs in Nigeria are projecting revenues that will either grow or hold steady. Over half (56 per cent) are projecting an increase.

With about 300 respondents per country in Kenya, Nigeria, Ivory Coast and South Africa, the report observed that as many regional economies gradually enter the normalisation and growth phase, and social restrictions continue to ease, small and medium-sized businesses in Nigeria have identified accepting digital payments (75 per cent), easier access to credit (72 per cent), and doing business internationally and digitising business operations (72 per cent) as the top three drivers for growth. This highlights the opportunities for small businesses that arise from both internal transformation as well as industry regulations and trends.

Mastercard said making sure that SMEs have all the support they need to go digital and grow digital is a key focus, as it works closely with various stakeholders including the government and banking institutions to create opportunities for Nigeria’s 41 million MSMEs.

Collectively, MSMEs contribute about 50 per cent to the national GDP, although this share could grow given that only 23 per cent of females operate formal SME businesses in Nigeria.

Mastercard has pledged $250 million and committed to connect 50 million MSMEs to the digital economy by 2025 using its technology, network, expertise and resources in support of the company’s goal of building a more sustainable and inclusive digital economy.

As part of these efforts, Mastercard is focused on connecting 25 million women entrepreneurs. For many small businesses, reducing their dependence on cash through digital payments acceptance has played a major factor in being able to get paid and maintain revenues.

Area Business Head, West Africa, Mastercard, Ebehijie Momoh, said: “Small businesses have faced big challenges over the past year, but one of the most important things they can do for their own growth and in terms of future-proofing their business, is to prioritize digital payments acceptance. It is extremely encouraging to see that Nigerian businesses are recognizing this and understanding the role that safe, secure and simple digital payments can play as they tackle the year and decade ahead with renewed optimism. At Mastercard, we are committed to keeping SMEs connected to the tools, they need to create new connections and sustainably grow commerce.”

Mastercard’s Economic Outlook 2021 estimated that 20 per cent to 30 per cent of the COVID-19 related surge in e-commerce would be a permanent trend in share of overall retail spending globally. Further, recent studies from Mastercard showed that over three in four Nigerian consumers (84 per cent) say that they would shop at small businesses, if they offered more payment options, and 81 per cent noted being more excited to shop at retailers that can offer the latest payment methods and an equal proportion (81 per cent) said they would be more loyal to retailers who offered multiple payment options.