Micro Small and Medium Enterprises, MSMEs, described by many as the engine of economic growth and promotion of equitable development has not lived up to expectation in Nigeria, in spite of efforts by successive governments to salvage the sub- sector. Market watchers however insist that the extent to which jobs would be created depends on the level of support given to MSMEs. UDO ONYEKA reports.
Globally, Small and Medium Enterprises, SMEs, are generally acknowledged as having huge potentials for employment generation and wealth creation in any economy. This very important sub-sector of the economy contributes substantially to enhancing employment creation or generation, poverty alleviation, equitable distribution of resources, income redistribution, technical and technological innovation, and so on.
According to a recent micro, small and medium enterprises survey conducted by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), in collaboration with National Bureau of Statistics, NBS, Nigeria has about 37 million MSMEs. These Micro Small and Medium Enterprises MSMEs, according to the survey, account for 48 percent of the country’s gross domestic product, while also taking 60 million people off the labour market.
However, available evidence shows that a lot of factors are stacked against the entrepreneurs or operators of these businesses.
In Nigeria however, the sector remains relatively small in terms of its contribution to GDP or to gainful employment.
Although SMEs are seen as veritable and viable engines of economic development, the growth and development of SMEs in Nigeria have been slow and in some cases even stunted, due to a number of problems and challenges confronting this all-important sub-sector of the economy.
Some of the problems highlighted as being responsible for their slow growth and development include: deplorable infrastructural facilities; funding and financing challenges; inadequate managerial and entrepreneurial skills; limited capacity for research and development as well as innovations; limited demand for their products and services; burden of multiple taxes; and overbearing actions of government functionaries and agents.
Others include difficulties associated with complying with regulatory requirements in the specific areas of operations of the SMEs; problems of undercapitalization and difficulty with access to bank credits; bureaucratic bottlenecks; corruption and lack of transparency arising from government regulation and regulators; as well as government’s lack of interest or focus in addressing the specific factors responsible for the abysmal performance of the sub-sector.
While stakeholders believe that the most disturbing among these challenges is funding, they however pointed out that in most cases, most new small business enterprises are not attractive prospects for banks as they want to minimize their risk profile.
In the past, there had been several efforts, by successive governments in Nigeria to propel growth in the small and medium enterprises sector.
Trying to salvage the SMEs, the Federal Government had in the 1950s established the Nigerian Industrial Development Bank NIDB, with several incentives to maximize exploitation of natural resources. Also in the 1990s, the Federal Government redoubled its SME development effort via the creation of the People’s Bank of Nigeria, PBN, and Small and Medium Industries Equity Investment Scheme, SMIES.
The current government and previous government at the centre have launched various initiatives aimed at assisting the SMEs. One of the projects it launched was the Micro, Small and Medium Enterprises, MSMEs, with cash flow of about N39.6bn meant to fund business development services to enhance the efficiency and productivity of the MSMEs.
According to its architects, while it was an attempt to re-position the MSME sector for better productivity, the project, tagged the Nigerian Business Development Services Network, NBDS, was designed to be an establishment comprising private sector business development services providers, whose main objective was to mentor, provide support services and link up with financial institutions.
Before then, the Federal Government had in 2014 launched a N220bn Micro, Small and Medium Enterprises Development Fund, MSMEDF, which objective was to provide long-term, affordable funds for players in the sector. This particular fund laid claim to 60 per cent consideration for women.
Also few months before the current administration came to power, precisely in March 2015, the Bank of Industry, BoI, earmarked about N300bn to further bridge the financing gap created in the operations of MSMEs.
The facility, designed to be accessed, over the next five years, is expected to boost activities of small businesses in the country. Besides, the National Association of Small and Medium Enterprises, NASME, the Bank of Industry (BoI), Access Bank Plc and Fidelity Bank Plc gave their readiness to provide required support for the Small and Medium Enterprises ,SME, sector, especially in the area of accessible financing.
To the Acting Managing Director and Executive Director, Small and Medium Enterprises, BoI, Waheed Olagunju, while it is obvious that the country is awash with funds for SMEs, the development financial institution has earmarked the facility for the next five years to achieve its objectives in the sector.
Olagunju explained that since the bank discovered that most SMEs’ businesses are not bankable, serving as a debacle hindering growth and development, BoI employed the services of 122 Business Development Service Producers, BDSPs, to help produce a tune of 1220 successful bankable projects over the next 12 months.
He said the bank also has a cluster-based financial programme to support industrialization, saying that infrastructure still remains a major constraint to the development of the sector. “We anticipate an upsurge in the demand for finance by SMEs; as a result of this, we have strengthened the bank to meet these demands. The funds are there but we are only going to support genuine businesses,” he said.
To President and Chairman of NASME council, Alhaji Garba Gusau, efforts to develop the sector require strong and supportive institutions and holistic infrastructural development as well as key and impactful sectorial intervention by the Nigerian financial sector, as a deliberate effort towards addressing the many years of the sector’s neglect.
President Buhari had promised to create an environment where millions of youth would be employed directly and indirectly. According to him, he would build a country that provides jobs for its young people reduce unemployment to the lowest of single digits and provide safety nets so that no one is left behind. He also added that if elected, entrepreneurship will thrive, enterprise flourishes and the government will gets out of the way so that people can create value, build the economy and aggressively expand wealth.
Many stakeholders believe that while it is an obvious fact that MSMEs are agreeably the bedrock of any economy, no matter the sector they are situated, beyond the financial challenge a good number of MSMEs face, the lack of proper articulation of entrepreneurial ideas and conceptions poses an equally serious challenge for the sector. MSMEs in Nigeria are faced with the challenge of lack of functional infrastructure, which creates an additional burden on costs of production, stakeholders noted.
Toying the same line with many stakeholders in the industry, in order to address the enormous challenges facing the SMEs in the country, the position of the Lagos Chamber of Commerce and Industry (LCCI), is that the Federal Government should go beyond financial interventions to Micro, Small and Medium Enterprises (MSME, and provide infrastructure for businesses to thrive.
According to a Lagos based financial and Chief Executive Officer, CEO, Matrix Finance and Securities Limited, Peter Igwe the challenges of the nation’s economy had made it imperative for the government to provide critical structures to facilitate sustainable growth of MSMEs and make them internationally competitive.
According to him there are greater challenges beyond funds confronting the MSMEs, identifying the needed infrastructure as power, road, portable water and effective mass transportation system.
Igwe in his submission, pointed out that power deficit increased operational cost of enterprises, reduced their production capacities, made Nigerian goods uncompetitive and contributed to the ailing of local industries.
“Roads are required to get goods to market; year-on-year, our agricultural produce waste and rot in the villages due to the poor conditions or lack of good roads. Potable water is needed for any aspect of human life, not to talk of business.
“Imagine how the lack of these precious inputs affects industries, whether micro, small, medium or large,” he said.
The chamber Vice chairman said that there was a great need for mass transportation, stressing that poor infrastructure for the conveyance of cargo had stunted the growth of MSMEs and limited their opportunities.
Urging commercial banks to practice true banking by making access to funds easy for SME operators, she noted, “There is the missing middle in financing of MSMEs. These are small and medium-size businesses that should be able to access the financial services that they require to grow through their banks.
“Unfortunately this is not happening for many reasons; the Commercial banks have appetite for large transactions and are averse to risks. The banks view SMEs as high risk and are unwilling to lend to them.
“Options outside traditional banking circles such as ‘Angel investors and venture capital’, though present in this economy, are very few.
“Our financial framework in this country is quite shallow and a bit volatile right now; long term financing is not readily available,” he said.
He advocated business support services and training for operators of MSMEs to nurture and hHe advocated business support services and training for operators of MSMEs to nurture and help them to find their way through the tough terrain of growing businesses.