The decision of the Nigerian Export-Import Bank (NEXIM) to support the export business of Small and Medium Enterprises (SMEs) with N36 billion in 36 states is encouraging. Under the plan, the bank has earmarked a minimum of N1billion for every state. Although N1 billion is too meager to make appreciable impact in the export sector, it is good to start somewhere.
However, we believe that close monitoring of the disbursement of the fund is of utmost importance in achieving the desired results. SMEs are businesses with less than N100 million in annual turnover and have less than 300 employees. According to the national survey by the Small Medium Enterprises Development Agency of Nigeria (SMEDAN), there are about 41.5 million SMEs in Nigeria. The number exceeds those in the United States, with 30.7 million SMEs. Therefore, the role of small businesses in Nigerian economy cannot be over-emphasised. SMEs account for about 84 per cent of jobs in the country.
It is commendable that NEXIM is collaborating with the African Export-Import Bank, which recently mapped out $10million to fund bankable projects of SMEs across the country. The fund will also enable states to benefit from the African Continental Free Trade Agreement (AfCFTA), which commenced in January 2021. The benefits include a borderless market of about 1.2 billion people, with a combined GDP of about $3.4billion. SMEs involved in cross-border trade can also leverage on this opportunity to increase their sales under a more liberal market condition.
For SMEs to play its role as the biggest contributor to the nation’s GDP, government should resolve critical problems militating against credit provision to medium and small enterprises. This can be done through the formulation of good policies that will support the private sector to bridge the country’s infrastructure deficits. A recent statistics showed that 94.3 per cent of small businesses in the country were hit by COVID-19 pandemic.
Other reasons include reduced market demand, unfriendly products, and inaccessibility to quality staff, among other factors. With about 24.5 million social media users, the forecast is that by 2025, the number will reach 45 million users. This means a huge market for SMEs. As Nigeria worries over low earnings from crude oil, it is a welcome development that the Federal Government is repositioning the nation’s export through the implementation of Export Expansion Facility Programme (EEFP).
According to the government, beneficiaries will draw from an initial financial take off of N50billion. This is part of the government’s Economic Sustainability Plan. The programme, which is expected to raise the volume of non-oil exports, came after the launch of the Economic Community of West African States (ECOWAS) Trade Promotion Organisations (TPOs). It is also aimed at cushioning the effects of the COVID-19 pandemic. According to the Executive Director of the Nigerian Export Promotion Council (NEPC), Segun Awolowo, who is also the inaugural President of ECOWAS TPOs, the EEFP will ensure the establishment of top notch warehouses in the country close to the nation’s airports where Nigerian goods meant for export will be packaged to global standards ahead of their exportation. All of this will boost government’s diversification drive and improve Nigeria’s terms of trade, which had fallen by over three per cent since 2019, according to the National Bureau of Statistics (NBS) Commodity Price Index. The decline was as a result decreases recorded in the prices of trade with the rest of Africa and Europe in recent years. The effort to boost Nigeria’s export is timely.
With the increasing need to expand intra-regional trade in the ECOWAS sub-region, there will be unlimited opportunities already created by AfCFTA, which Nigerian exporters can leverage on. There is no doubt that the reliance on oil for decades has led to economic stagnation, especially now that that the price of oil has been fluctuating. With paucity of funds, it has become difficult for the government to effectively plan budgets and measure their outcomes. The mainstay of the economy remains agriculture and manufacturing where the country has comparative advantage.
Considering the significant role Micro, Small and Medium Enterprises (MSMEs) play in the economy, they must be given enough support to boost the nation’s export trade. To achieve the lofty objective of boosting export, the government should develop the manufacturing sector and agric business. These include improving the Ease of Doing Business (EoDB), exchange rate stability, and steady power supply. Nigeria’s terms of trade can only improve if export aggregation and inclusion, trade facilitation and market development are strengthened.
Besides, the relevant government agencies should equip Nigerian exporters, regulators, financiers and policymakers with the practical knowledge and business skills required to compete effectively in the global export market. If the NEXIM fund is transparently managed, it will enhance economic diversification, job creation and more foreign exchange earnings for the country.