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How SMEs can thrive in trying times

Bayode Agbi is a seasoned Chartered Accountant and Tax Practitioner with a track record spanning over two decades in the fields of accounting, accounting solutions and tax management. Agbi is not just an accountant; he is an “accountpreneur” and the Chief Executive Officer (CEO) of Pillar Craft, a forward-thinking company specialised in delivering cutting-edge cloud solutions tailored for Small and Medium Enterprises (SMEs). In this interview, Agbi talks about accounting practices, the intricacies of the tax regime, the specialised accounting needs of SMEs and the innovative solutions for SMEs to thrive.

As an accounting expert who specialises in providing financial solutions to SMEs, what is the fate of SMEs in the present economic situation in the country?
Well, the situation is critical but it can be salvaged. The future of SMEs seems uncertain due to inflation, which is affecting the peoples’ purchasing power, poor infrastructure, unreliable electricity supply and the lingering effects of COVID-19.  So many SMEs are finding it hard to recover from COVID-19 effects; and the current high inflation rate, which reached a multi-decade high of 27.3 per cent last month, have placed significant pressure on these small businesses. Apart from these challenges, multiple taxations, regulatory hurdles and limited access to credit facilities are making it difficult for SMEs to thrive.

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However, as I said earlier, the situation can be salvaged as some operators of our SMEs have demonstrated resilience and adaptability by adjusting their operations strategies and putting in place cost-saving measures. The ingenuity of these SMEs needs support from the government to provide a conducive business environment. The government must address the unreliable power supply, which is fairly better now and provide a support mechanism to cushion the effects of economic fluctuations.

What innovative solutions can SMEs embrace to thrive in the modern environment? 
There are so many innovations SMEs can incorporate to stay ahead in today’s business world. For instance, leveraging the digital space. SMEs can have online shops and e-commerce to tap into the global customer base to boost sales. Also, they can embrace accounting technology like cloud-based accounting software, e–commerce platforms and CRM systems to streamline their operations and reach wider customers and targets. Another key innovation is outsourcing.  SMEs can leverage the game of flexibility to outsource their accounting with specialised firms for financial efficiency and effectiveness and equally embrace remote work, getting freelancers to access specialised skills and adapt to changing market needs.

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Another key innovation is networking and collaborating with other businesses, local and global, and finding new opportunities. Also, SMEs should keep learning. Invest in training and upskilling to stay competitive and keep your team sharp; manage your finances smartly with modern financial tools and apps that can help you keep track of expenses and make informed decisions. In short, in today’s business, it is either you innovate or die.

What is cloud accounting and its relevance to Nigeria’s economy?
Cloud accounting is like doing your business finances on the Internet instead of using traditional software or paper and its relevance to Nigeria’s economy, especially for small businesses, cannot be underestimated. Cloud accounting is cost-effective and budget friendly for small businesses that can’t afford fancy software and equipment. With this in place, SMEs can spend money on other things. Cloud accounting is convenient, efficient and does a lot of work like organising data, doing calculations and generating reports amongst others in real-time and your data is safe with encryption and backups. In short, cloud accounting is a smart move for Nigerian SMEs. It’s affordable, flexible and efficient. And it can help businesses grow and contribute more to the country’s economy. It can create jobs and boost Nigeria’s economy as more SMEs doing well means more jobs and more money flowing around.

What other creative ways can Nigeria employ in solving its over-reliance on oil?
Our over-reliance on oil has been our bane for so many years and it seems the government over the years had paid lip service to the diversification of other sectors. But it seems this present administration is ready to take the bull by the horns. Though, not sounding repetitious, Nigeria has incredible potential in agriculture but we just need to tap into it. I urge President Bola Ahmed Tinubu’s administration to boost our farming techniques, grow diverse crops and develop the entire agricultural value chain to increase food production and create a bunch of jobs.

Renewable energy is another shift in economic diversification. With renewable energy, we would not only have succeeded in reducing our reliance on oil for electricity but also in harnessing the power of nature, creating a cleaner, more sustainable future. Plus, it opens up opportunities for green jobs in the energy sector. Tech innovation and encouraging startups will attract investment to the country. We should also encourage local production to move from being just a consumption country to a producing one. Also, our tourism potential is there for the country to tap. If the government can explore these opportunities and many more, it will be like nurturing a new economic engine right beneath our feet and reducing our over-reliance on oil to build a more diversified and resilient economy for the future.

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Do you think the government should depend solely on tax as an alternative to oil to raise revenue? 
Well, I don’t think so. You know, putting all our eggs in the tax basket isn’t the best idea. We should rather diversify our revenue sources. Just like a well-balanced investment portfolio, having various streams of income can make our economy more robust. Depending solely on taxes might make us vulnerable to economic ups and downs. Also, we should understand the volatility of tax revenues as taxes are unpredictable. So, if we rely solely on taxes, we might struggle during tough times when tax collections drop. But be that as it may, we need to up our game in tax collection, improve tax collection methods and reduce tax evasion. With this, we can get more from what’s already coming in. It’s like optimising our finances without raising taxes. So, to sum it up, while taxes are important, putting all our revenue hopes on them might not be the wisest move. We should diversify our income sources and explore new economic sectors. That way, we build a more resilient and sustainable financial future for Nigeria.

As a chartered accountant and tax practitioner, what is your view on Nigeria’s current economic and tax policies? Do you see a connection in both?
Well, in my perspective, Nigeria’s current economic and tax policies are closely intertwined. President Bola Ahmed Tinubu’s economic revival plan, with its ‘Eight-Point Agenda,’ aims to address various socio-economic challenges. It’s a shift towards more thoughtful planning and consultation. President Tinubu has also taken steps to reform Nigeria’s tax administration with the establishment of the Presidential Committee on Fiscal Policy and Tax Reforms to boost tax collection rates and achieve a tax-to-GDP ratio of 18 per cent by 2026. This is crucial because Nigeria currently falls short in tax revenue.

The challenge is that many Nigerians and businesses aren’t fulfilling their tax obligations. To bridge this gap, recommendations from tax experts are essential and we should focus on centralising tax collection, addressing revenue leakages and ensuring compliance, especially from wealthier individuals and businesses. No doubt, there is a vital connection between Nigeria’s economic and tax policies as a robust tax system can enhance revenue generation and support the government’s efforts to address socio-economic challenges. Success depends on effective implementation, political will and a commitment to achieving results.

How can the government expand the tax net without creating further hardship for the citizens?
This is achievable but the government has to be careful in order not to create further hardship and misunderstanding of its policies. The government can broaden the tax net by formalising and regulating the informal sector, bringing more businesses and individuals from the informal economy into the formal tax system in a gradual and non-disruptive manner. Also, implementing progressive taxation is a smart move. This means that those with higher incomes pay a higher percentage of their income in taxes. This approach ensures that the tax burden falls more on those who can afford it while providing relief to lower-income individuals and businesses.

Another step the government can take is to simplify the tax system because when the tax system is straightforward and transparent, it’s easier for businesses and individuals to understand their obligations and comply. This can encourage voluntary tax compliance. Of importance is taxpayers’ education, which is not there now. The government needs to invest in campaigns that inform citizens about their obligations and benefits of paying taxes. Better educated taxpayers are more likely to comply and less likely to evade taxes. As I said earlier, let us leverage technology for tax collection

How can the government align its tax process to grow SMEs in the country?
Certainly possible and doable. We just need our administrator to be intentional about this and have the growth of SMEs in mind. The government can implement SME-friendly tax policies which exist in various Finance Acts and circulars. Moreso, tax officers need to prioritise supporting SMEs’ growth over revenue generation and the government should streamline the tax compliance process, making it less burdensome for SMEs. This includes providing user-friendly online platforms and standardised procedures that are easy to follow. Other things the government can do are to incentivise informal businesses to formalise their operations, allow for tax breaks, create access to government support programmes and offer good credit facilities as well as a conducive business environment that can motivate SMEs to register and comply with tax regulations

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