As at the end February 2021, we’ve surprisingly come out of a recession. But poverty and unemployment lingers on. The year started straight out of unrests and infrastructural vandalism as a result of the Endsars protests. We’ve moved on but deeper into the crisis of national insecurity. We are survivors. As SMEs we have survived two waves of Covid-19 Pandemics, but its harder combining that with lower sales, higher tarrifs and the hikes in utility bills. All these affects our cost of sales and admin expenses as businesses.
In terms of post COVID supports, SMEs are on their own. The government keeps self-sabotaging itself. There is a loss of public confidence, loads of blame game from a non-communicating presidency flooded with nepotism. Nothing is certain. Our monetary policy retains its dwindling parallel exchange rates. FDI confidence is on its all time low due to unrest and unease of doing business here. And on the streets and offices, social distancing has changed consumer behavior. Nigerians are very social, so there is an enterprise implication from halting industries that support our usual lifestyles. These lifestyles fund so many businesses. These businesses contribute to the macro-economc circular flow of wealth that is now shortened. Welcome to our reality as SMEs.
Don’t panic. In the book, Seven Habits of Highly Effective People, Stephen Covey gives a good illustration of how we should categorize our concerns as SMEs. He broke them down into two; Circle of Concern and Circle of influence. Our Circle of Concern are things or areas in life and our business where we tend to worry about but have ‘no real control’ over e.g. ill health; exchange rates while those things or areas we can work on e.g. strategy, innovation habits, are in our Circle of Influence. Worry overwhelms us when we channel our time and energy to things in our Circle of Concern instead of things in our Circle of Influence.
Let’s explore some of our circle of concerns we have no control over as SMEs. According to the exchange rate, one dollar now equals 400 Naira in banks, and on the black market, a dollar now trades at 475 Naira which harms businesses especially SMEs. The 2021 budget for Nigeria shows an increase from last year’s budget by 21%. Last year’s budget was about 10.6 trillion Naira compared to this year’s budget of 13.8 trillion Naira. Looking at that budget, one would think that the government has bigger or better plans for SMEs than last year. But that’s really not much of the case.
One interesting fact about this year’s budget is that there is an increase in debt allocation, but a decrease in spending on health and education. This is bad for players in that sectors. The government would have loved to aggressively tax more but dare not. Fiscal policy will have to be a bit slower as the country can’t aggressively go after SMEs on tax matters else they cause an uproar, or we all close shops and cause more supply to the unemployment matter. Nigeria is not just broke but in debt. The debt servicing is almost 3 times more than the total allocation to education and health, combined. One of the only good news about our national budget is that there is more spending around infrastructure. This rippled effect shows that it will be favorable to those in logistics, real estate and construction.
From that budget, there is a 37% projected increase in revenue from 2020 anchored on forecasted increased oil prices, enhanced operational efficiency in government-owned enterprises which if we’re being sincere is not certain.
But how about our circles of influence (things we have control over); what can we influence from the new dynamics of consumer behavior?
A very practical example of consumer behavior leverage is the explosive success of Netflix. During the pandemic, people stayed indoors most of the time because of the fear of contracting COVID 19. People stopped going for physical meetings, people stopped going to cinemas or film houses. People had to look for other alternatives. Netflix and Zoom was that digital alternative. They both blew up the financial chart. What alternative are you providing?
SMEs should explore how macro economic changes are affecting consumer behavior. And then align their competitive advantage from it. Retail for example has become more intimate, has your business become that too? During the pandemic, while the open market shrunk, organized retail stores gained. This is because while the crowd reduced, brand activations moved closer to us via experiential marketing in neighborhood stores than large ATL advertising. In other words, people’s attention moved from big markets to retail stores, the Internet and our mobile phones. This is a perfect time to either setup a business model around one or go into supply or support services to one.
The winners of our economy will come from SMEs that can organize themselves within the disorganized markets. To do this, they must systemize and be structured. The truth is that the more structure you have in your business, the more freedom you will have in your life. They should also start looking at ways in which they can scale and grow their brands with lesser inputs. With structures, they can franchise or cash out through an FDI or local merger and even acquisition. We all can be freer, we all can dream bigger. We can do more with less by automating our processes. We should also go into strategic partnership with other bigger brands for larger exposure. None of these require government. Dear SME, you are on your own. So, let’s gather around. Let me help.
Strategy. Business StartUps and Corporate Restructuring Consulting
Uwaoma Eizu is the lead strategist at Hexavia! He is a graduate of Mathematics with two MBAs and over a decade of experience working with startups and big businesses. His core is in building startups and in corporate restructuring. He is also a certified member of the Nigerian Institute of Management, Institute of Strategic Management of Nigeria and the Project Management Institute, USA. By the side, he writes weekly for the BusinessDay newspaper.