Taxes are mandatory payments or charges collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Inflation, on the other hand, is a general increase in the prices of goods and services in an economy. The impact of taxes on market women and small-scale businesses can not be overlooked.
Market women and small business owners play an important role in the Nigerian economy, especially in the informal sector. On average, medium and small-scale business owners (including market women) in Nigeria generate annual revenue of N2.3 million. With an operating margin of N768,000. It is general knowledge that taxes are important sources of revenue for Governments, but they can have severe effects on businesses.
In 2020, the Nigerian Government increased the VAT on goods and services from 5% to 7.5%. This has affected market women and small business owners who operate on thin profit margins. A study by the International Centre for Tax and Development records that 1.48 percent of Nigeria’s GDP is from tax revenue, especially from small and medium business owners. This article aims to explore the effects of taxes and inflation on market women, highlighting the need for policies that support their businesses.
High Inflation in Nigeria
Nigeria’s inflation rate stood at 33.40% in July 2024 down slightly from a peak of 34.19% in June. This is a result of several issues including the removal of fuel subsidies, amongst other issues. Inflation has affected the prices of goods and services, thereby reducing the purchasing power of consumers. As inflation reduces consumers’ purchasing ability, most market women have difficulty selling their goods since consumers can’t even afford basic necessities.
Many market women have also reported difficulties in sourcing their goods due to hikes in transportation costs and supply chain disruptions. For example, the cost of transporting goods from Northern Nigeria to Southern markets has increased significantly. This has further led to inflating prices of certain commodities, which include rice and tomatoes.
A market woman also reported that the price of a basket of tomatoes has increased from ₦40,000 to ₦150,000 within a year. Making it nearly impossible for her to sell at a profit while keeping prices affordable for her customers. Market women who rely on selling goods to make a living are severely impacted by inflation and their cost of living is reduced.
Tax Policies on Market Women
According to research, tax systems in Nigeria frequently fail to account for the disparities in economic realities that men and women encounter. The use of flat tax rates penalizes women because they earn less than men but are taxed the same. A study conducted in Enugu and Kaduna states found that while female traders pay the same flat presumptive taxes as their male counterparts, they generally earn significantly less.
For example, the Kaduna State Tax Law specifies a presumptive tax of ₦2,500 (approximately $6.90) for microbusinesses. Which disproportionately affects women who typically have lower earnings than men in similar trades. High tax burdens combined with low earnings create a significant financial strain for market women. Many traders report that they struggle to cover their basic expenses, let alone pay taxes.
Effects of Taxes and Inflation on the Market Women
In Nigeria, taxes and inflation significantly impact market women, who are often the backbone of local economies. High taxes can reduce their profit margins, making it difficult for them to sustain their businesses. Market women, who typically operate on thin margins, may find it challenging to pass on these additional costs to consumers without losing customers. Inflation aggravates this issue by increasing the cost of goods and services. As the prices of essential commodities rise, market women must spend more to stock their stalls, further squeezing their already tight budgets. This can lead to a decrease in the variety and quantity of goods they can offer, affecting their competitiveness and profitability.
Additionally, inflation erodes the purchasing power of consumers, leading to reduced sales for market women. They face the dual challenge of higher operating costs and lower consumer spending, creating a precarious business environment. In the long term, these financial pressures can force many market women out of business, leading to a loss of livelihood for them and their families. The combined effects of high taxes and inflation thus pose a significant threat to the economic stability and growth of market women in Nigeria, necessitating targeted policy interventions to support this vital sector.
Need for Policies to Support their Business
It would be beneficial for the Nigerian government to consider implementing policies that support market women’s businesses, particularly in relation to taxation. Many market women lack access to financial services and business support. These types of policies will help to mitigate the harsh effects of the current economic climate. Tax exemptions or reductions, business training programs, access to affordable credit, and investment in market infrastructure could go a long way in reducing the financial pressures faced by market women.
By providing such support, the government can help stimulate local economic growth, improve food security, and reduce poverty. Recognizing the significance of market women in the Nigerian economy and exploring ways to empower them could contribute to the country’s overall economic development and stability.
Additionally, such policies could help increase market women’s participation in the formal economy, enhance their competitiveness, and improve their overall well-being. This will generally lead to more inclusive and equitable economic growth.
In conclusion, Nigeria’s market women face significant challenges from high taxes and inflation. Targeted policy interventions and support from government and non-governmental organizations can transform their prospects. Easing tax burdens, controlling inflation, and providing financial literacy and affordable credit can empower market women to thrive. This supportive ecosystem will uplift them and drive broader economic growth and stability in Nigeria.
By fostering a favorable business environment, market women can expand their businesses, improve their livelihoods, and contribute to the country’s economic development. With support, they can overcome challenges and achieve a brighter future. These efforts will not only benefit individual women but also contribute to the overall development of the country.
