In Nigeria today, from the benefit of hindsight, can it be said that the micro, small and medium-sized enterprises (MSMEs) have now been accorded their due recognition in the economy compared to what their position was about a decade ago? I would say yes to the above question. The reason for this is not farfetched, as the nexus of the changing trend kicked-off from the moment the country’s leadership returned to the hands of democratically elected leaders.
The new democratic dispensation in 1999 was faced with the immediate challenge of revamping the ailing economic situations in the country and this witnessed an out-pouring of comments, recommendations and white papers on the way forward towards building a more sustainable economy. Prominent among these comments and recommendations which featured in several articles, write-ups, reports and newspaper columns, was the need for the government to concentrate its efforts on taking advantage of the enormous potentials embedded in the SMEs sector.
The SMEs sector all over the world has been identified as the key driver and engine-room of all the major economies in the world. They make up the largest proportion of businesses and play tremendous roles in wealth creation, employment generation, provision of goods and services, creating a better standard of living, as well as immensely contributing to the gross domestic products (GDPs) of many countries (OECD, 2000). However, the SMEs sector in Nigeria was plagued by a plethora of problems and militating factors inhibiting its growth and development; thus hindering the country from deriving benefits from the successful performance and enormous potentials inherent in this sector, which have led to the development of all the leading economies in the world.
Toping the chart of these militating factors were: the unfavourable and very harsh economic conditions resulting from government policy summersault; gross undercapitalisation, strained by the difficulty in accessing credits from banks and other financial institutions; inadequacies resulting from the highly dilapidated state of Infrastructural facilities; physical and personal insecurity; bureaucratic red-tape; astronomically high operating costs; deficiency in transparency, corruption; and the lack of lasting support and interest for the SMEs sector by previous regimes, amongst a host of others (Oboh, 2002; Okpara, 2000; Wale-Awe, 2000; World Bank, 2002).
Authors, writers, researchers and columnists decried the woeful failure of several past efforts targeted towards the promotion and development of the SMEs sector such as the National Economic Reconstruction Fund (NERFUND), National Risk Fund (NRF), Industrial Training Fund (ITF) and the People’s Bank of Nigeria (PBN) amongst others. They also lamented the fiasco surrounding wasteful large (white elephant) projects such as the Ajaokuta Steel Complex, Bachita Sugar Factory and Iwopin Paper Mill to mention a few (Ariyo, 1999). According to them, the way forward to kick-starting Nigeria’s then (in 1999) moribund economy out of the doldrums was to create a robust business climate that could attract both local and foreign investment, and foster the spirit of enterprise by promoting the development of the SMEs sector.
Did the Administration Listen?
I am of the opinion that the Obasanjo led administration listened to these recommendations and followed swiftly to implement a good number of them. Firstly, they set-out to shop for the best brains of both home and overseas-based Nigerian professionals and technocrats to constitute a solid team that will form the bedrock and core driving force towards revamping the nation’s ailing economy. The team was beseeched with the Herculean responsibility of pursuing a massive economic reform agenda for the country, and this heralded the sudden ubiquitous proclamation (to the common sensibility of the average Nigerian) of names such as Ngozi Okonjo-Iweala, Magnus Kpakol, Oby Ezekwesili, Charles Soludo, Mansir Muktar, Akin Arikawe and a host of others. Secondly, they were handed the mantle of the nation’s comatose economy to put their heads together and forge a way forward for the country out of the woods. The rest is history!!! Looking back today, there is no doubt that the SMEs sector have benefited immensely from the national economic reforms.
Over the past 8 years of the Obansanjo administration (mainly in the second half), there have been several efforts deliberately targeted towards the promotion and development of the SMEs sector. The fact that Nigerian SMEs have today gained widespread recognition within the African sub-region and are now seen as playing a consciously significant role in the economic development of the nation attests to the success of the efforts introduced.
These efforts include the galvanising of the National Economic Empowerment and Development Strategy (NEEDS), built around government’s avowed policies of deregulation, job creation through the empowerment of SMEs, provision of infrastructure and the mobilisation of long-term capital for investment amongst others; the establishment of the Small and Medium-Scale Enterprises Development Agency of Nigeria (SMEDAN), serving as an umbrella body for all SMEs; the introduction of the National Poverty Eradication Programme (NAPEP), assisting to tackle the problems of poverty and unemployment by granting loans to start-up micro and small-scale businesses; the merger of Nigeria Bank for Commerce and Industry (NBCI) and Nigeria Industrial Development Bank (NIDB) to establish the Bank of Industry (BOI), meant to assist in resuscitating ailing small, medium and large-scale industries; the conversion of Community Banks to Micro Finance Institutions (MFIs), with a focus on funding SMEs; and the introduction of the Small and Medium Industries Equity Investment Scheme (SMIEIS), an initiative of the Banker’s Committee, which seeks all banks operating in Nigeria to set aside 10 percent of their pre-tax profit for equity investments in SMEs.
The ideas and concepts behind the introduction of SMEDAN, SMIEIS, BOI and MFIs crystallizes the recommendations on setting up a National Small Business Office in the model of America’s Small Business Agency and the UK’s Small Business Service; and the establishment of the Small Business Development Bank (SBDB) to help combat the problem of undercapitalisation, as well as promote the development of the entire SMEs sector suggested by Ariyo (1999) amongst other writers.
So what is the Level of SMEs Awareness Today?
Over the past few years the issue of SMEs have taken centre stage in the country, and dominated most discussions on Nigeria’s economic development. Recognition has now been accorded to the local chambers of commerce’ and industries, as well as other associations promoting the development of the SMEs sector such as the National Association of Small and Medium Enterprises (NASME) and the National Association of Small Scale Industries (NASSI). Universities and other tertiary institutions have now started offering entrepreneurship courses and modules on small business development. Secondary and primary schools now have entrepreneurship clubs and are no more handling business subjects with levity. Also, every state and almost all local governments now have their own miniature policies on promoting SMEs development at the grassroots level.
It has even been noticed that there has been an upsurge in the number of conferences, seminars, workshops and symposia all devoted towards stimulating an enterprise culture within the country. Many of these programmes, some of which have been tagged “How to become your own boss”, “Business without Borders”, “The Four Streams of Income” and so on are being sponsored and organised by both the public and private sector, as well as international and regional organisations such as the Commonwealth Business Council, NEPAD and USAID (Lessard, 2007).
In addition, almost all the newspapers and business dailies in the country now contain special columns devoted to small business and enterprise development. Some of them now have sections featuring biographies and stories of successful entrepreneurs and enterprises, how they started, the challenges they encountered, how they were surmounted and the progress they have made so far. These tend to serve as a motivation for budding entrepreneurs. I make bold to say that Nigeria is presently in the era of an unprecedented “SMEs Craze”.
So have SMEs in
To this question, my answer would be a big “NO”. I believe a lot still needs to be done. SMEs in Nigeria still grapple with problems of infrastructural inadequacy and this is one of the key constraints to private sector development (Adenikinju, 2005). The grossly erratic power supply, deplorable condition of road networks and inadequacy of structured or mass markets still act as clogs in the wheel of SMEs growth in the country. In addition, the lack of personal and physical security necessitated by the activities of ethnic militia groups and pockets of violence around the country have done more harm than good to the development of the SMEs sector.
So Where Do We Go From here?
I recommend that that newly elected government led by Umaru Yar’adua should consolidated on the gains of the out-going administration regarding SMEs development in Nigeria. The prevailing SMEs policies should be carried on effectively and fine-tuned where necessary to further strengthen the growth of the sector and forestall previous problems of policy inconsistencies.
Government needs to seriously tackle the problems of infrastructural inadequacy. Energy should be top priority on the national development agenda of the in-coming administration and more needs to be done on providing better road networks. Furthermore, considering the population of Nigeria, more funding mechanisms and windows need to be opened-up for already existing and potential entrepreneurs who intend to expand their existing businesses, acquire improved technologies or establish new businesses. This would serve as useful tool towards creating more jobs for the country’s mass unemployed graduates and non-graduates.
Government needs to put adequate structures in place to settle the grievances of ethnic militia groups and bring about a safer and secure business environment that engenders the thriving spirit of enterprise and attracts more foreign investments. SMEs should be supported to improve the quality of their product and service offerings. They should also be supported to access mass markets and channel their products and services for exportation.
Now we have realised that the route to sustainable economic prosperity in Nigeria is in the development of our SMEs sector, it is time to consolidate on the gains of the out-going administration. Then and only then can our SMEs stand shoulder-to-shoulder with their counterparts in the developed world and proclaim uhuru!!! .
Adenikinju, A. (2005). Analysis of the cost of infrastructure failures in a developing economy: The case of the electricity sector in
Ariyo, D. (1999). “Small firms are the backbone of the Nigeria economy”, Africa Economic Analysis, Africa Business Information Services, Bridgnorth.
Lessard, J. (2007). SMEs Development in Nigeria: Can it Be Done? Business Connect Newsletter of the Abuja Enterprise Agency (AEA). January – March, pp.21.
Organisation for Economic Co-operation and Development (OECD) (2000), “Small and Medium-sized Enterprises: local Strength, global reach”, OECD Policy Review, June, pp. 1-8.
Oboh, G. A. T. (2002). Banks Participation in the Promotion of Small and Medium-Scale Enterprises. Being a paper presented at the 6th Fellows and Associates Forum of CIBN on 13th April.
Okpara, F. O. (2000). Entrepreneurship (Text and Cases).
WaleAwe, O. I. (2002). Entrepreneurship Development. 2nd Edition. Gilgal Publications, Lagos: Nigeria.
World Bank Report on Nigeria (2002).
This article was written in March 2007