Wanted: More funding, capacity building for MSMEs

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The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is seeking more funding for Micro, Small and Medium Enterprises (MSMEs) by the Central Bank of Nigeria (CBN). To the National Bureau of Statistics (NBS) and SMEDAN, poor access to fund is the bane of MSMEs. A national survey by NBS and SMEDAN, showed MSMEs grew from 39 million in 2013 to 41.5 million in 2017. The report is meant to establish a credible and reliable database for MSMEs and promote job and wealth creation, writes COLLINS NWEZE.

The economies of great nations thrive on the strength and capabilities of their Micro Small and Medium Enterprises (MSMEs). In Asia, Europe and North America, MSMEs play significant roles in their emergence as global economic powers.

The same cannot be said of Nigeria as MSMEs’ operations have been hampered by poor access to finance, poor infrastructure and government policies inconsistency.

To reverse this trend and put Nigeria’s MSMEs on sound footing, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and National Bureau of Statistics (NBS) last week unveiled the 2017 National Survey for MSMEs in Lagos.

The survey showed that MSMEs operators grew from 39 million in 2013 to 41.5 million in 2017.

Speaking at the unveiling of the survey in Lagos,   SMEDAN Director-General, Umaru Dikko Radda, said the report has become an invaluable compendium on the state of the MSMEs sub-sector in the country.

He said the setting up of SMEDAN in 2013 was the government’s major response to tackling the problems of MSMEs, especially providing capacity for the industry and seeking more funding for the sector in a coordinated fashion.

He said the setting up of SMEDAN in 2013 was the government’s major response to tackling the problems of MSMEs Click To Tweet

“With a mandate to promote the development of the SMEs sub-sector of the Nigerian economy, SMEDAN assumed the twin roles of coordination and facilitation as the agency for MSMEs development. With an estimated 3.33 million enterprises in 2017, Lagos not only leads in total enterprise numbers but in each of the three enterprise classes- micro, small and medium,” he said.

He also called on the government to establish MSMEs bank and make loan access by small business easier.

Radda said the agency has instituted a five-year strategic plan to tackle the challenges facing the sector.

“We are talking more on our operation and we would want to concentrate more on the fewer activities we have. We are talking about capacity building, business development support, which is very much needed at this time. If you did build the capacity of the people for them to be competitive, they cannot grow even if you give them money,” he said.

He said the Central Bank of Nigeria (CBN) is giving SMEDAN the opportunity to train the people taking the N220 billion SMEs intervention funds as part of the requirement for the loan. “It is after SMEDAN has trained the operators, assessed their business plan and get them to complete the loan forms that the documents will be sent to the CBN for the disbursement of the loan,” he said.

It is after SMEDAN has trained the operators, assessed their business plan and get them to complete the loan forms that the documents will be sent to the CBN for the disbursement of the loan,” he said. Click To Tweet

He said SMEDAN was not interested in the loan disbursement but is simply requesting that the CBN makes sure that this was given to them and the agency given more responsibility to monitor and evaluate the loans.

Also speaking, Statistician General of the Federation, Yemi Kale said MSMEs play a significant role as the engine for economic transformation and industrialization for both developed and developing countries.

Such roles, he said, include improved income re-distribution (low-level capital required), job creation & skills development (particularly for youth, women, elderly), adoption of technology & innovation (competitiveness), industrial diversification, stimulate the local economy (demand down the value chain).

Kale also listed challenges facing MSMEs as vulnerable to economic shocks,  stable and supportive policy environment, excessive regulation, complex & cumbersome tax process, skills acquisition for youth population among others.

Kale also listed challenges facing MSMEs as vulnerable to economic shocks, stable and supportive policy environment, excessive regulation, complex & cumbersome tax process, skills acquisition for youth population among others. Click To Tweet

Even the Vice President, Yemi Osinbajo believes that MSMEs are the bedrock of Nigeria’s industrialization and inclusive economic development; and the most important component of industrialisation as set out in the Economic Recovery and Growth Plan (ERGP).

Kale said the survey was conducted in all 36 states of the federation, including the Federal Capital Territory (FCT), Abuja. Both urban and rural enumeration areas were covered.

“Poor access to finance was highlighted as a major challenge for MSMEs. Also in the list are poor power supply, inadequate water supply, taxation and unfavourable government policies among others,” he said.

He said 22,200 households, 600 households with enterprises interviewed per state, 15 households selected per enumeration area in getting figures for the micro-enterprises. For the Small and Micro Enterprises (SMEs), 4,000 operators were visited across all states, including FCT.

He said that of the 41.5 million MSMEs nationwide, Micro constituted 41,469,947 (99.8 per cent) , Small: 71,288 (0.17 per cent) and Medium: 1,793 (0.004 per cent). Click To Tweet

He said that of the 41.5 million MSMEs nationwide, Micro constituted 41,469,947 (99.8 per cent) , Small: 71,288 (0.17 per cent)  and Medium: 1,793 (0.004 per cent).

Continuing, Kale said: “Composition of sectors is different for each business type classification, primarily due to staff requirements of more formal establishments. For instance,  Education & Construction are low for small business but top 5 for medium-scale enterprises. Education, Manufacturing, and Wholesale/Retail Trade make up 68 per cent of small enterprises. Manufacturing, Wholesale/Retail Trade, and Human Health & Social Works make up 68 per cent of medium enterprises”.

Other key observations in the report are that wholesale/retail trade, agriculture, and other services activities make up 76.3 per cent of Micro enterprises.

Sectors requiring high numbers of employers or skilled labour – education, human health and social works,  communications have very low numbers of micro enterprises. Accommodation and Food services is a preferred sector across all business classification types.

According to the survey, a large majority of micro businesses are sole proprietorships, SMEs, however, are more distributed with 65% sole proprietorship, 21 per cent private limited liability, six per cent faith-based, and five per cent partnerships. Micro businesses are mostly younger people 26 to 50 years old, while 88 per cent of SMEs operators is over 36 years old.

According to the survey, a large majority of micro businesses are sole proprietorships, SMEs, however, are more distributed with 65% sole proprietorship, 21 per cent private limited liability, six per cent faith-based, and five per… Click To Tweet

Also speaking at the event, National Chairman, Nigerian Association of Small and Medium Enterprises (NASME), ‘Degun Agboade, the survey statistics provides an opportunity for MSME operators to plan, network and seek greater benefits in the industry. He commanded the Corporate Affairs Commission (CAC) for reducing the company registration fee from N10,500 to N5,500 adding that it has many operators to formalise their businesses.

He said that the SMEDAN and NBS partnership will continue to make the business environment profitable and sustainable for business owners. He also said that all the stakeholders should unite to make funding available to MSMEs.

Acting Registrar, Corporate Affairs Commission, Lady Azuka Azinge, said the World Bank figure showed that about 30 per cent of employment in the world are created by MSMEs. She said there has been an inconsistent figure on the number of operators in Nigeria, adding that the new survey has put every speculation to rest.

Acting Registrar, Corporate Affairs Commission, Lady Azuka Azinge, said the World Bank figure showed that about 30 per cent of employment in the world are created by MSMEs. She said there has been an inconsistent figure on the… Click To Tweet

She said poor market, low level of credit, high incidence of informal operators among others.

She said the commission will continue to support SMEDAN to ensure that more operators in the informal sector are brought into the formal sector for efficiency in planning and credit administration.

Other stakeholders said to fund their operations, MSMEs initially turn to internal and external sources of finance. Internal sources include personal savings, borrowings from family and friends and credit from local cooperative societies, but as the business expands, they require a greater pool of funds that are made available by these sources to meet business financing needs. The external sources of finance provide wider access to large pools of funds, which are required for MSMEs to exploit growth and investment opportunities.

They insisted that MSMEs can expand operations by identifying and utilising business opportunities with better access to finance structured specifically to cater to identified needs. Such funding, they added, will come from financial institutions such as finance companies, commercial banks, development finance institutions, government grants and funds and venture capital funds.

The SMEDAN has also inaugurated the Conditional Grant Scheme (CGS) with the support of the Federal Government.

The CGS was created to promote micro-enterprises across the country through capacity building and delivery of post-intervention support services such as access to finance (conditional grants), markets, workspace, technology, among others.

Findings showed that Nigeria SMEs have largely performed below expectation as a result of poor access to finance, inadequate managerial skills, poor accounting practice, poor infrastructure, policy somersault, multiple taxes, environmental factors, and marketing problems, among others.

SMEDAN, with the backing of Federal Government, unveiled the CGS to reverse the trend.

The scheme was created to improve the internally generated revenue of the three tiers of government across the country thereby reducing over-dependence on oil revenue.

It will also improve the human, technological and financial capacity of operators of microenterprises. The scheme is expected to lift the sub-sector, making it more efficient and financially viable.

Speaking at the launch of the scheme in Lagos,  Radda,  said the micro enterprises sub-sector is a critical sub-sector in the Nigerian enterprise development space.

He said the sector collectively account for the majority of the enterprises in the country and also account for the highest number of jobs created in the economy. The findings in the National MSMEs survey of 2010 and 2013 revealed that micro-enterprises represent 99.87 per cent (17,261,753) and 99.80 per cent (36,994,578) of total enterprises respectively.

“In terms of employment, the total number of persons employed by microenterprises in 2010 was 15,641,460 (representing 90.41 per cent of the total number of employed persons). In 2013, the total number of persons employed by micro enterprises was 57,836,391 (representing 96.88 per cent of the total number of persons employed). “However, it is important to note that over 90 per cent of the micro enterprises is informal and populated by people at the bottom of the pyramid. Hence, the need for the Agency to conceptualize a flagship programme referred to as Conditional Grant Scheme for micro enterprises in Nigeria,” he said.

According to Radda, the justification for a special entrepreneurship/vocational development intervention for the entrepreneurs at the bottom of the pyramid cannot be overemphasised based on the need to graduate informal enterprises to the formal sector, industrialise the nation, develop the rural economy, stem youth restiveness and unemployment and create the platform for sustainable economic growth and development in Nigeria.

“This present initiative (Conditional Grant Scheme) looks to promoting the activities of micro-enterprises across the country in the areas of capacity building and the delivery of post-intervention support services such as access to finance (conditional grants), markets, workspace, technology, among others”.

The pilot phase of the project was conducted in 2017 in Katsina State where 34 Local Government Areas (LGAs) were involved, Gombe (11 LGAs), Ebonyi (13 LGAs), Oyo (33 LGAs), Akwa Ibom (31 LGAs) and Benue (23 LGAs). This makes a total of 145 LGAs.

He said: “Moreover, the Agency will be working in partnership with other stakeholders in achieving the objectives of the programme. They are banks, Federal Inland Revenue Service (FIRS), Business Development Service Providers… Click To Tweet

Considering the socio-economic impacts on the enterprises of the beneficiaries, the agency decided to extend the programme to other states of the Federation subject to availability of project funds. Presently, the programme is scheduled to run in three states which are Lagos, Bauchi and Sokoto States.

According to Radda, the scheme will help move the micro-enterprises from the informal to the formal sector, creation of jobs, wealth and poverty alleviation in the society, enhancing the competitiveness of these enterprises towards meeting national, regional and global standards and improving the internally generated revenue of the three tiers of government across the country thereby reducing over-dependence on oil revenue.

He said: “Moreover, the Agency will be working in partnership with other stakeholders in achieving the objectives of the programme. They are banks, Federal Inland Revenue Service (FIRS), Business Development Service Providers (BDSPs), State and Local Government, Insurance Companies and Corporate Affairs Commission (CAC). Also, the eligibility of the prospective beneficiaries of the scheme is based on business registration or willingness to register their enterprises, the need for additional investment, lack of access to formal financial services, proof of address in the LGA/personal identification and above all the enterprises must have progressive economic potentials.”

Radda said the scheme has provision for the award of excellence to high performing enterprises in all the LGAs of the selected states to reward hard work/success and to encourage high performance from other enterprises. The conditions for the award will include the turnover of the enterprise.

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Furthermore, in SMEDAN’s determination to address the challenges confronting the MSMEs in Nigeria in a holistic manner, the agency is implementing One Local government One Product (OLOP) in one hundred and nine (109) senatorial districts in the country. This effort of the is based on the successful implementation of the pilot phase of the OLOP programme. The intervention activities under OLOP among others include access to workspace, equipment support, access to working capital, capacity building and so on,” he stated.

Radda said the first step to the scheme is to identify beneficiaries and partners, sensitisation and needs assessment, entrepreneurship training registration of enterprises and opening of bank accounts.

These will be followed with the delivery of grants, provision of microinsurance, provision of tax holiday and follow-up, and impact assessment.

“Moreover, the agency will be working in partnership with other stakeholders in achieving the objectives of the programme. They are banks, Federal Inland Revenue Service (FIRS), Business Development Service Providers (BDSPs), State and Local Government, Insurance Companies and Corporate Affairs Commission (CAC). Also, the eligibility of the prospective beneficiaries of the scheme is based on business registration or willingness to register their enterprises, the need for additional investment, lack of access to formal financial services, proof of address in the LGA/personal identification and above all the enterprises must have progressive economic potentials,” he said.

The scheme also has provision for the award of excellence to high performing enterprises in all the LGAs of the selected states to reward hard work/success and to encourage high performance from other enterprises. The conditions for the award will include the turnover of the enterprise.

Chairman, SMEDAN Governing Board, Femi Pedro, noted that the MSMEs sector is fraught with numerous challenges, assuring that the board will work closely with the management of SMEDAN to address the identified challenges.

He said the CGS launch is timely and a good step to solving SMEs funding and logistics problems in the country. He said that SMEDAN is committed to the growth of SMEs in Nigeria.

Speaking further, Radda has recognised the need to boost SMEs operations by putting in place strong measures that confront these challenges facing the sector.

From the implementation of the One Local Government, One Product (OLOP) Program, National Enterprise Development Programme (NEDEP), establishment of the SME Rating Agency of Nigeria, credit information portal, ICT development to implementation of the Nati

onwide MSMEs Clinic to mention but a few, SMEDAN is helping the Federal Government to realise its vision of improving the economy and lives of the citizenry through skilled entrepreneurship and access to finance.

The One Local Government, One Product (OLOP) programme remains an important input into the development agenda of the present administration. The programme was meant to identify and facilitate specialisation of unique product or service peculiar to each of the 774 local government areas in the country.