Do you, like me, think of starting a small and medium-scale enterprise but are scared of taking the leap of faith? Or you are like my friend, let’s call him Solomon Grundy, who registered a domain for a sports website on Monday. The site went live on Tuesday. Indexed by Google on Wednesday and reached peak traffic on Thursday. It started to slow on Friday; it got hacked on Saturday and taken offline on Sunday. And that was the end of SportsNigeria!

The rapid-fire sequence of life events coupled with Nigeria’s harsh economic climate ensures that each year, many SMEs fall on hard times like our Solomon Grundy.

Here are the stats:
• According to 2021 data from the National Bureau of Statistics (NBS), more than 20% of SMEs fail in the first year, and nearly 50% fail within the first five years
• About 39,654,385 SMEs operated in Nigeria as of December 2020 as against 41,543,028 in 2017. A decrease of 4.5%
• Over 40% of SMEs fail because of low demand for their products/services. Nineteen percent of the failure was because the SMEs were “out-competed,” while 17% was because of their poor product offering
The stats didn’t lie, but it ignored the challenges faced by SMEs.

A 2020 survey by PwC, spread across 29 states and the six geopolitical zones, provided insights into a range of issues concerning SMEs in Nigeria, from the perspectives of their CEOs. Input from 1,629 key stakeholders in the sector with annual sales turnover ranging from N5 million and above was obtained.

Key findings include:
• Unlocking finance, finding customers, and infrastructure deficits are the most pressing problems
• Electricity is responsible for the highest cost of operations, followed by rent and cost of capital
• Top economic issues are pressure to reduce prices, rising inflation and low demand for products/services
• Local government levies are the most difficult taxes to comply with
• MSMEs would prefer private equity over debt financing

Let’s hear the story of Bose Ajuwata.
In 2020, the graduate of Theatre Arts left Nigeria in search of greener pastures. She braved the Sahara and the Mediterranean Sea and successfully crossed to Italy. Two years later, Bose came back to Nigeria because of the lack of proper documentation.

Before leaving the country, she worked as a tailor with an SME. With support from friends and the seedmoney she got from the International Organization for Migration, who facilitated her return, she established a tailoring firm in February 2023.

The fashion industry is critical in the Nigerian economy. It creates jobs, promotes innovation, and contributes to the GDP. Data from NBS shows that the “textile, apparel, and footwear” sector has averaged a growth of 17% since 2010. The result of this is the great demand for skills in the industry. Given this demand, Bose needed to up her game. But her dream almost derailed with the dawn of a “neweconomy”. And it began after a speech on May 29, 2023.

In his inaugural message, President Bola Tinubu announced that “subsidy is gone”! Then everything went downhill. Bose’s business was barely three months old when the economy took a downturn. The naira plummeted in value, making it difficult for her to importmaterials. Sales dropped, and she had to sack two of her employees, both of whom were single mothers. She cut back on expenses and made tough choices about how to allocate her resources.

Resilience and Adaptation
Sound management entails paying attention to present reality while applying hard work and prudence. Before the “neweconomy”, Bose focused on her existing products to an existing market using marketing strategies like pricing, improved user experience, and improved product. But she could do more.

She launched her product on the online market. Besides having her website, she sells through third-party sites like Jumia, Konga, and Amazon. She also uses Facebook, Google Ads, and email marketing.

With the changing market conditions and increasing competition, Bose decided to review her strategy for creating and exploiting business opportunities. She diversified into textile-related ventures like fabric trading.

Segmenting the market and deepening the product line not only increases the average margin but also increases the market share. Bose implemented this strategy. She sliced the fashion industry into segments like age, religion, gender, purchasing power, status, and physical location. It helped her to gain expertise in meeting the needs of specific market niches.

Another market growth strategy in a harsh economic climate is partnership through cooperationand networking between SMEs towards a common goal. Partnership creates a market, so from the training she had had, Bose networked with people from diverse backgrounds. They shared facilities, did cross-marketing, and leveraged common strengths.

Financial literacy is crucial for owners of SMEs to make informed decisions, manage finances effectively, and ensure the long-term sustainability of their businesses. With such training, Bose improved her knowledge, especially in bookkeeping.

There are government and private sector support for SME growth that serves as a buffer in harsh economic climates. The CBN has different types of interventions, while the Bank of Industry operates different loan products for SMEs for equipment and working capital financing.

Some institutions support SMEs at different stages of business growth, like the Tony Elumelu Entrepreneurship Programme, Academy of Women Entrepreneurs, Ford Foundation, MTN Foundation, etc.

Harsh economy? What’s that?
In 2023, BusinessDay newspaper recognized the top 100 promising SMEs in Nigeria. What earned them a mention on the list? Their ability to thrive despite the harsh economic climate. Those SMEs showed remarkable growth, profitability, strong business frameworks, and promising potential for further expansion.

Bose and her brand, February 1st Couture, didn’t make the longlist, but she has demonstrated the resilience and adaptability that is characteristic of many entrepreneurs.

Now, her plans include growing her fashion brand beyond Nigeria Fashion Week and GTBank Fashion Weekend. She hopes to display her clothes at the Paris Fashion Week and New York Fashion Week, someday.
The future is indeed bright!