Despite their huge economic impact, the recent report that the number of Micro, Small and Medium Enterprises (MSMEs) operating in the country dropped by 1.88 million to 39.65 million in 2020, is not encouraging. This is compared to about 41.54 million in 2017. This is outcome of a recent survey jointly conducted by the Small and Medium Enterprises Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS).
According to the Director-General, SMEDAN, Dr. Dikko Umaru Radda, the survey was an update on previous survey, necessitated by the need to provide realistic, robust and useful data for economic planners. The survey found that the decline in the number of small enterprises was largely due to the impact of COVID-19 pandemic, the worsening insecurity in the country as well as the negative impact of the global competitiveness on local enterprises.
Besides, the survey findings showed that the MSMEs sector witnessed 3.5 per cent in its contribution to the nation’s Gross Domestic Product (GDP). Officially, there are 41.5 million registered MSMEs in the country, comprising 41.4 million micro enterprises and 73,081 SMEs. Together, they are responsible for 59.6 million jobs, which represent 86.3 per cent national workforce. Undoubtedly, the new survey will serve as a wake-up call for collective action that will create the enabling environment for small businesses to thrive. More than ever before, the peculiar environment that many MSMEs operate pose serious challenges to their survival and contribution to national economic growth and development.
A total of 61.95 million persons were reported to have been engaged in MSMEs subsector in 2020, while 16.04 million micro enterprises employment was said to have been generated across the informal sector, with agriculture generating 61.1 per cent of the jobs, while 7.49 million jobs were generated in the formal sector, with manufacturing accounting for 21.6 per cent. This represents the highest employment among SMEs, according to official government data.
A recent survey by the Ministry of Industry, Trade and Investment has also shown that MSMEs account for about 76 per cent of the nation’s labour force and contributes about 50 per cent to the GDP. MSMEs account for over 90 per cent of all firms globally and on the average, account for about 70 per cent of the total employment and 50 per cent of GDP worldwide. Considering its pivotal role in stimulating economic growth and providing employment to vulnerable groups, such as the youth, women and the poor, we call on the government to sustain the growth of MSMEs.
In view of the factors that negatively impacted the subsector, resulting in the decline of small businesses in the year under review, there is need for more interventions to cushion the effects of economic downturn. This will enable them recover. In the past, one of such interventions was the MSMEs Survival Fund and Offtake Scheme. No nation can develop its economy without concerted effort that will facilitate private sector participation, financing and improving social services delivery in its economy. That is why government should continue to provide the enabling environment and incentives to the subsector. The Bank of Industry (BoI) a few years ago said it disbursed loans to over three million MSMEs and 653 large enterprises between 2015 and 2020 through which about seven million direct and indirect jobs were created.
For years, MSMEs operators have complained about poor access to finance and the unwillingness of banks to grant them loans at low interest rates in spite of the directive by the Central Bank of Nigeria. This has made it difficult for many MSMEs to contribute meaningfully to the growth of the economy. Sadly, the government’s relaxation of the collateral requirements for small businesses to access the N220billion intervention fund by the CBN in 2014 was observed more in the breach. The main objective of the fund was to provide wholesale credit to MSMEs at three per cent.
Rather than do that, the banks insisted on a double-digit interest rate, repayable over a five-year period. This and unfriendly policies stifle the operations of small businesses. These policies include high tariffs on electricity and sundry taxes that raise the cost of production that are eventually passed on to consumers. Government needs to improve the Ease of Doing Business (EoDB) by ensuring adequate security. It can also offer tax holidays and other incentives that will enhance the performance of MSMEs. Let government see small businesses as “little beginnings with huge impact.” If the business environment is conducive, many of them can become mega businesses that can stimulate economic growth and create more jobs.