Often described as the heartbeat of the economy, Micro, Small and Medium Enterprises (MSMEs) and the industrial sector have described the ongoing cash crunch as worsening the woes of the real sector.

Indeed, stakeholders express worry about the impact of limited cash on production and productivity, even as many gradually adjust.

Specifically, operators in the food and beverages sub-sector decried the impact of the cash crunch on capacity utilisation, noting that many consumers are wary of spending available cash on certain items, even as online transactions falter.

The president of the Manufacturers Association of Nigeria (MAN), Francis Meshioye, said the scarcity of the Naira is having an impact on production output.

Speaking on the impact of the scarcity, Meshioye said: “it is affecting all economy and manufacturing sector in particular, because inability of people to access cash particularly for products that cannot be easily procured by electronic transfer will imply, there will be a backlog in the stock of those goods.”

The MAN President adds “When you have a backlog of stock, it means you are tying down your money. It means it may have an effect on the production line, because the production line may have to slow down”.

One of the top brewing firms in the country confirmed the impact of the cash crunch on the operations of the firm, especially at the retail end, noting that sales have declined as consumers now prioritise what they spend available cash on.

President Muhammadu Buhari had on Thursday February 16, announced that one of the old currency notes 200 naira would remain in circulation for 60 days to cushion the impact.

According to Statistica, there are about 41.4 million MSMEs in Nigeria. The International Labour Organisation, a specialised agency of the United Nations, said MSMEs account for 96 per cent of businesses and 84 per cent of employment in the country.

The ILO further disclosed that Micro, Small and Medium Enterprises contribute 48 per cent of Nigeria’s national Gross Domestic Product.

Similarly, the latest purchasing managers index (PMI) has shown that Nigerian firms recorded a slight loss of growth momentum in January, citing lower demand, issues with machinery and power supply.

The operators worry that the trend will continue till the situation eases.

With the Central Bank of Nigeria’s cashless policy, many businesses are having difficulties in finalizing transactions due to poor access to cash and downtime on payment channels.
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According to the PMI report, output and new business continued to rise markedly, but at softer rates than at the end of 2022.

On the other hand, purchase costs increased on the back of rising fuel and raw material costs, exacerbated by currency weakness. Meanwhile, staff costs rose at the fastest pace in 11 months as companies increased pay in line with higher living costs. Output price inflation also remained elevated as higher cost burdens were passed on to customers.

On a more positive note, the report shows that Nigerian private firms raised employment at the fastest pace since June 2018 as part of efforts to complete work on time. On the price front, rates of inflation of input costs and output prices softened in January but remained elevated.

The headline PMI dipped to 53.5 in January from 54.6 in December. Although still signalling a solid monthly strengthening of the private sector and the thirty-first in consecutive months, the rate of improvement was the softest since August 2022.

The PMI showed that business activity increased at a much slower pace at the start of the year, despite the rate of growth remaining mark. The latest rise was the weakest in five months. Demand continued to improve, but some firms reported a moderation in customer numbers.

Activity increased across each of the four broad sectors covered by the survey. The rate of expansion in new business also softened in January, but remained sharp nonetheless, again reflecting higher demand from customers.