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How Economic indicators Affect Startups and Small businesses

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Every day in the news we get inundated by somewhat boring news of how GDP growth rate has fallen by a percentage point or more. We also hear about the inflation rate rising or falling depending on the data from the bureau of statistics. These days, we get to even hear of the jobs report showing how many jobs have been created or lost within a time frame. These news might sound boring for a lot of small business despite the fact that their survival is inherently tied to the numbers. In this article, we will attempt to highlight and explain how macroeconomic indices affecting every startup and small business.

GDP

The Gross Domestic Product (GDP) basically values the total number of goods and services produced in a country within a certain period of time. It is one of the most important and tracked indices for determining growth in a country. Small business should also track GDP as it is a pointer to how the larger economy of which they are a subset of is doing. For example, for years China has led the world as the fastest growing economy by posting GDP growth rate of over 10%. What that means is that as the economy continues to expand, small businesses have a near infinite market that they can sell their goods and services to.  In contrast, small businesses suffer the most in countries where GDP growth rate is slowing or negative (otherwise said to be in a recession).

Inflation Rate

The inflation rate basically is a measure of the increase in prices of goods and services. It is also one of the most followed headline number of any economy as it is tracked by foreign investors, banks, government etc. Depending on the size of the economy, an inflation rate is thought to be manageable if it is in single digits. High inflation rate means that prices of goods and services are rising too fast thus eroding savings and purchasing power. A very low inflation rate also means prices of goods and services are stagnant suggesting the economic growth is flat. For small businesses, higher inflation rate could be a major challenge. For example, it could mean that your goods or services may be too expensive for your customers to purchase. Higher inflation also often leads to higher lending rate as the next indices below explains. Businesses should therefore be worried when inflation numbers rise uncontrollable or hit double digits as it means consumers could cut back on business leading to drop in sales.

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MPR

Nearly every other month the Central Bank’s monetary policy committee meets to deliberate on the economy. It is a very closely followed event as investors in Nigeria and all over the world focus on the decision made at that meeting. One of the key policies made is the Monetary Policy Rate (MPR) where the MPC determines the benchmark rate for its lending to commercial banks. Banks typically add a margin on the MPR when they charge interest rates on loans. For example, when the MPR was increased from 12% to 13% banks raised lending rates from about 19% to 23% per annum. For small businesses who don’t track such policy pronouncements or anticipate it they often get caught in an interest rate hike trap.

Unemployment rate

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The unemployment rate basically measures the rate at which job is created or lost in an economy. The National Bureau of Statistics also tracks this rate and publishes it monthly. A high unemployment rate is probably one of the best indicators of purchasing power and consumer spending. If unemployment rate is on the rise, it means more people are losing their jobs or don’t have jobs which for small businesses simply means slower sales, smaller profit margins and even bankruptcy. It is also important to track what sectors of the economy are creating the most jobs or losing as it can be a good way of knowing where to invest or start a business.

Price of oil

Unlike the others the price of oil is quoted nearly on a daily basis. However, the amount of crude oil produced daily is not known till the end of the month. Nigeria’s is expected to sell at least 2.2million barrels of oil per day. Selling less means smaller revenue for the government. The Nigerian government is one of the primary sources of stimulus for the economy and gets over 70% of its revenue from oil. If oil price and production are falling then it is an indicator of very slow economic growth. Already most small businesses in the tourism sector are feeling the brunch as oil companies cut spending massively due to drop in the price of oil. As a small business, this indices should be watched closely to avoid falling into a collateral damage.

All share index

The all share index is the leading indicator for the performance of the stock market. Whilst its effects in Nigeria is not that much it is often the bell weather in most developed countries. Even though the Nigerian stock market makes up less than 15% GDP it is still a very important tool that should tracked by small businesses and startups. An All Share Index that is on a free fall is often an indicator of what is to come. For example, the Nigerian stock market as early as November 2014 displayed the earliest sign of how tough 2015 will be when it had a major sell off. Investors sold of shares in droves as they predicted the price of oil will fall further leading to a devaluation of the naira. Small Businesses and Startups who tracked this number would have planned very well ahead to avoid the consequences.

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Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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MSME

FG says 174,574 successfully register for N75 billion MSME survival fund in 48 hours

174,574 persons have successfully registered for schemes under the Nigeria Economic Sustainability Plan.

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FG releases new details on MSMEs support scheme, budgets N200 billion for loans, FG says 174,574 successfully register for N75 billion MSME survival fund in 48 hours

The Federal Government has disclosed that a total of 174,574 persons successfully registered for the N75bn National MSME Survival Fund and the Guaranteed Off-take Stimulus schemes under the Nigeria Economic Sustainability Plan, within 48 hours.

The disclosure was made by the Minister of Industry, Trade and Investment, Ambassador Mariam Katagum, during a media briefing on the update of the schemes, on Thursday, September 24, 2020.

Mariam Katagum, in her statement, said: “As at 8.30 am this (Thursday) morning, total successful registrations stood at 174,574 with the following states having the highest applications as follows: Kano, 19,895; Kaduna, 13,575; Lagos, 13,640; Katsina: 8,383; Federal Capital Territory, 8,085.”

She stated that the registration for the MSME Survival Fund commenced on September 21, 2020, at 11 pm, and within 24 hours, approximately 138,000 individuals had logged on, created profiles and completed the first stage of registration with Kano, Kaduna and Lagos as lead states.

(READ MORE: Nigeria’s external reserves up by 7% in 21 days, currency speculators to lose over N10 billion)

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Going further, Katagum said, “All successful applicants received SMS and email verification with a list of requirements for the second stage of application which would commence on October 1, 2020. Applicants will be required to upload details supporting their applications which will be verified and if successful, approved for disbursements.”

The minister further disclosed the states that recorded the highest numbers of applications within the first 24 hours of registration; these are Kano, which recorded 16,880: Kaduna, 11,438; Lagos, 10, 530; Katsina, 7,354; and Bauchi, 6,622.

Explore the Nairametrics Research Website for Economic and Financial Data

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She also stated that registration for other tracks would start next with the hospitality industry coming on September 25, 2020, by 10 am; payroll support (others), September 28, 2020, 10 am; while artisan/transport grants would start on October 1, 2020.

Nairametrics had two days ago reported the opening of the portal for its N75 billion Micro, Small and Medium (MSMEs) Survival Fund and Guaranteed Off-take schemes with effect from 10 pm on Monday, September 21, 2020.

READ: Delivering mass housing as a path to Nigeria’s economic recovery

These two MSMEs initiatives namely MSMEs Survival Fund with payroll support track and the Guaranteed Offtake Scheme which are at the core of FG’s N2.3 stimulus package in the Economic Sustainability Plan, were introduced by it as part of the efforts to help businesses overcome challenges posed by the Covid-19 pandemic.

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MSME

How to register for FG’s N75 billion MSME survival funds

FG released guidelines to access the N75 billion MSME Survival Fund.

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MSME, How to register for FG's N75 billion MSME survival funds, Small Businesses in Nigeria

The Federal Government (FG) has released the guidelines to access the N75 billion Micro, Small and Medium Enterprises (MSME) Survival Fund and Support Initiatives, which took effect from September 21, 2020.

The scheme, which is the core of the N2.3 trillion stimulus package of the Nigerian Economic Sustainability Plan includes the N60 billion MSMEs Survival Fund and the N15 billion Guaranteed Offtake Schemes.

This disclosure was made in an official statement by the Federal Government through a series of tweet posts on its official Twitter handle.

READ: FG to provide financial support for 1.7 million businesses, individuals in next 3 months

The statement from FG read, “As the portal for the registration of prospective beneficiaries of Survival Fund opens, interested Nigerians in the Payroll Support Scheme are to note that the site will be open from 10 pm Monday, September 21, 2020.”

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The statement says that the registration for the payroll support will start with the educational institutions at 10 pm Monday, September 21, 2020, and will be followed by businesses in the hospitality industry by 12am Friday, September 25, 2020.

The portal will also open for other categories of small businesses from 12am, Monday, September 28, 2020. It should be noted that the scheduling of the registration for prospective beneficiaries is to ensure that the process is seamless and hitch-free. The registration of every sector is to continue until Thursday, October 15, 2020.

READ: FG to save N1 trillion annually from petrol subsidy removal

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To register for this initiative, the Federal Government has also provided a portal for entry. Potential beneficiaries are advised to log on to https://survivalfund.ng to complete their registration.

As part of the registration process, the beneficiaries are expected to provide personal registration details, activate their account, register their organization after they have successfully activated their account.

Corporate Affairs Commission (CAC) Number, Bank Verification Number (BVN), SMEDAN Number, a Tax ID (optional) and the organization’s bank account details will be needed.

Completing the Payroll Support Registration, beneficiaries’ first name, last name, email, mobile number and Password will be required. Also, their Date of Birth, residential address and residential Local Government Area will also be provided.

READ: FG releases new details on MSMEs support scheme, budgets N200 billion for loans

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These 2 MSMEs initiatives namely MSMEs Survival Fund with payroll support track and the Guaranteed Offtake Scheme were introduced by the FG as part of the efforts to support businesses overcome challenges posed by the Covid-19 pandemic.

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The MSMEs Survival Fund scheme is a conditional grant to support vulnerable micro and small enterprises in meeting their payroll obligations and safeguard jobs in the MSMEs sector. The scheme is expected to save at least 1.3 million jobs across the country and specifically impact on over 35,000 individuals per state.

READ: Nigeria’s external reserves up by 7% in 21 days, currency speculators to lose over N10 billion 

The scheme will be implemented over an initial period of 3 months and is targeted at employees of MSMEs and self-employed individuals with 45% for female business participation and 5% for special needs participation

The Guaranteed Off Take Stimulus Scheme is expected to perfect and sustain the income of vulnerable micro and small enterprises from the economic disruptions of the Covid-19 pandemic through the implementation of various initiatives aimed at boosting the production capacities of small businesses as well as the provision of grants.

The duration is also for an initial period of 3 months and is targeted at micro and small businesses registered in Nigeria.

 

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FG to provide financial support for 1.7 million businesses, individuals in next 3 months

FG had announced specific programmes aimed at cushioning the impact of COVID-19 on MSME businesses.

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FG releases new details on MSMEs support scheme, budgets N200 billion for loans, FG says 174,574 successfully register for N75 billion MSME survival fund in 48 hours

The Federal Government has announced plans to provide financial support for 1.7 million businesses and individuals across the country within the next 3 months.

This disclosure was made by the Minister of State for industry, Trade and Investment, Ambassador Mariam Katagum, at the virtual commissioning of the Fashion Cluster Shared Facility for Micro, Small, and Medium Enterprises (MSMEs) tagged, Eko Fashion Hub, in Lagos.

Katagum disclosed that the initiative is borne out of the Federal Government’s continued commitment to helping cushion the devastating impact of the coronavirus pandemic on the economy by saving existing jobs and creating new job opportunities.

READ: FG releases new details on MSMEs support scheme, budgets N200 billion for loans

The minister said that President Muhammadu Buhari’s administration, through the Economic Sustainability Committee, had announced specific programmes aimed at cushioning the impact of COVID-19 on MSME businesses.

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She said, “The Federal Government is fully committed to empowering Nigerians; more so in the face of the COVID-19 Pandemic. In this regard, the government, through the Economic Sustainability Committee had announced specific programmes aimed at cushioning the impact of COVID-19 on MSME businesses.

“These programmes include among others, the N75 billion MSME Survival Fund and Guaranteed Off-take Schemes of which I have the honour to chair the Steering Committee for the effective implementation of the projects.

READ: NNPC reveals survival strategies to cope with the oil sector downturn and new normal

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“The project, which will run for an initial period of three months, is targeting 1.7million entities and individuals and has provisions for 45 per cent female-owned businesses and five per cent for those with special needs. The registration portal for the schemes is set to open on Monday 21st September 2020 and I urge you all to take full advantage of the schemes.’

The Nigerian Economic Sustainability Plan which was produced by a committee headed by the Vice President, Yemi Osinbajo, is a response to the health and economic challenges which foisted on the country by the outbreak of the novel coronavirus pandemic.

READ: FG to save N1 trillion annually from petrol subsidy removal

Aside from developing robust monetary policies and fiscal measures to enhance oil and non-oil government revenues and reduce non-essential spending, the plan also includes a N2.3 trillion stimulus package for the economy.

Katagum said that the schemes were at the core of the N2.3 trillion stimulus package being implemented by the Federal Government. She said that the commissioning of shared facilities was also expected to provide succour and relief to the teeming micro-businesses in need of space and infrastructural support

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