It is common knowledge that Small and Medium Enterprises (SMEs) mostly close shop at the expiration of their rents due to harsh business terrain in Nigeria where only the proverbial strongest and biggest survives the competition.
This conception is contradictory to the 15 places rise Nigeria recorded in the World Bank’s ease of doing business report for 2020.
In the Doing Business Index (DBI) ranking released by the World Bank last week ranked Nigeria moved to 131st position from 146th last year. The report stated that Nigeria improved in the six indicators the report measures.
Despite this reported improvement, SMEs and start-ups are yet to feel the impact in their processes.
In Lagos, one of the states the World Bank report surveyed – SMEs and start-ups still face a hostile business environment from multiple levies and taxation, the problem of host communities, to “landlords’ wahala.”
To confirm this position, Sim Shagaya, a one-time Chief Executive Officer of a popular e-commerce platform, Konga, revealed in a series of tweets recently how the business process of Konga was temporarily halted by a credit facility tussle between a commercial bank and the owner of their distribution centre.
In 2014, we were going gangbusters. We were growing 20+% month on month. Lots of operational challenges but this one would be special. Then at 630am one day, I got a call from our head of fulfillment. The Nigeria Police has shut down the distribution centre. Details were murky.
— Sim Shagaya (@SimShagaya) October 27, 2019
According to him, the owner of the distribution centre defaulted on a loan repayment and the bank used law enforcement agents to foreclose the warehouse.
“What I found were over 100 warehouse workers that were chased out of the facility milling about along with a platoon of policemen.
“Mounds of sand – 6 feet high – dumped in front of and blocking the gates. I calmly pulled the officer in charge aside and asked what the problem was. He told me that we had defaulted on a loan to a bank and the bank had taken charge over the DC.
“It turned out that our landlord – the DC owner, who we had rented the place from – indeed was indebted to the bank. And the bank’s collection officer was convinced that the landlord owned the online retail operation,” he said.
This, he claimed, took him several days to resolve due to the way and manner the company and the bank chose handled the case.
Shagaya added: “We spend the whole day at the collecting firm’s offices at Dolphin Estate. We finally hammered out a deal. I would write a cheque for two years additional rent in favour of the bank.
“I send an email to the board authorising the payment of over N60 million – exceeding my unilateral approving authority. Approval is unanimous. It’s close of business so the bank draft will wait till tomorrow.
“They reviewed the agreement and we executed it. The firm then informed us that only the bank can give authorisation to the police to vacate the premises. We head over to the bank’s offices.
“We sat in the lobby waiting for the CEO, head of loan recovery or frankly anyone we could meet. We waited for four hours. Nothing has happened. In one hour, I would have to shut the site down.”
In July this year, the Lagos State Government had proposed a N25 million annual license fee for motorcycle hailing businesses within the state. This after the taxes and levies they have to pay to the Lagos State Internal Revenue Service (LIRS), local governments and different agencies.
This kind of harsh business climate only hampers the growth of SMEs and startups.