Mrs Gertrude Akhimien, the Chairman of the Lagos State Chapter of the Nigerian Association of Small Scale Industrialists, has revealed that 30 percent out of over 24 million registered small and medium enterprises in Nigeria folded up in the previous year.
Akhimien disclosed this in a conversation while reacting to the recent removal of electricity subsidy by the Federal Government in Lagos.
Akhimien said, “At least 30 percent of the businesses I am aware of have shut down. Many called me to say that they had shut down and I told them we would try to see how we could manage the situation and all that; how we could do one day in and out. The shutdown was between last year and this year.”
According to the report, the subsidy on electricity has been removed completely from the tariff payable by power consumers in the Band A category, who constitute about 15 percent of the total number of power users in the country.
The government revealed the hike in the electricity bill at a press briefing in Abuja organised by the National Electricity Regulatory Commissio on Wednesday, adding that those affected would now pay a tariff of N225 per kilowatt-hour, about a 240 percent increase from the previous N68/kWh.
Akhimien said most of the association’s members have started selling off their equipment.
“When someone is selling his or her production material, what does that tell you? They are shutting down; they are all up for sale,” she declared.
She emphasized that the removal of electricity tariffs would reduce the profit margin of SMEs as power contributes 50 percent to their operating costs.
“When you input the cost of electricity or diesel or any other source of power in your system, it takes almost 50 per cent of the cost of the business. So, if you are spending 50 per cent of the total cost of your business on just power, where will you see the profit from?” she quizzed.
She noted that people now stay in businesses by operating once or twice a week to save costs.
“I have seen people businesses swing their operations, whereby, they operate like once or twice in a week. They just come to do their production and then shut down. That can’t continue.
“You don’t do business like that and of course, it is affecting workers because people would lay off their staff members,” she lamented.