The role of small businesses in countries is very important because these businesses contribute to local economies by bringing growth and innovation to the community where the business is based. Small businesses also stimulate economic growth, by providing employment opportunities to individuals who may have difficulty securing a job in big corporations or companies.
It is imperative to say that when small businesses are properly funded, it is a strong catalyst for the growth of the economy of a nation. Although in Nigeria, small businesses are not properly funded as they suffer a 48 trillion naira funding gap. Some small and medium scale enterprises (SMEs) in Nigeria don’t operate at their full capacity because of the challenges that have hampered their growth. Some of these challenges are lack of modern technology, unfair market price, lack of access to finance, etc.
The secret of developed and developing countries is the fact that small and medium-scale enterprises are properly funded. One common major challenge these businesses often faced with is the lack of access to loans. These businesses have difficulty in obtaining loans from banks and other financial institutions, sometimes they are often faced with high-interest rates which often crumbles the business in the long run.
Although the Central Bank Of Nigeria (CBN) has a criteria that small and medium scale businesses must meet before they can be granted loans. Which is an asset base between 4 million and 500 million naira, and a staff strength between 10 and 100 employees.
In Nigeria, there is a very high rate of unemployment, which has seen it rise in the country to 35% in 2021, according to a report by a credit rating agency, Agusto & Co. Once small businesses are properly funded, there will be a drastic decrease in the unemployment rate, because SMEs are important contributors to job creation.
The SME sector in Nigeria accounts for most Nigerian jobs and contributes nearly half of the country’s GDP in nominal terms. With over 37 million SMEs in Nigeria, they contribute to almost 50 percent of GDP in nominal terms and account for 84 percent of all Nigerian jobs. Thus, these businesses contribute to the country’s national income, productivity, and employment.
According to sources, few Nigerian banks have stood out in supporting small businesses to reach their full potential. Some of these banks include; First Bank, Fidelity Bank, UBA, Fidelity Bank, and Wema Bank. This is commendable and also would be great if other banks can also join to support small and medium scale businesses in the country so that they can attain their lofty dreams.
Most of these banks in Nigeria, unlike the ones above-mentioned, have high-interest rates, which is usually a burden to these businesses and eventually leads to the mortality of the business. It is quite unfortunate that despite the importance of SMEs to a nation’s gross domestic products and GDP, they are given less attention in Nigeria.
Although another way that would be ideal in funding small businesses in Nigeria is through crowdfunding, where a group of SMEs can come together and put resources to start a business. Unfortunately, it is a very big challenge in Nigeria, because a typical Nigerian will rather compete than collaborate. Some Nigerians believe in a one-man squad.
However, there is a great need for the government of Nigeria to create schemes that will make it easy for small and medium scale businesses to access loans with fair interest rates to boost their business. They must understand that SMEs are the future of the already dwindling Nigerian economy, if they are properly funded, it will boost the country’s economy.
A substantial portion of Nigeria’s economy is produced by small businesses. According to the report, an estimate of 600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SME development a high priority for many governments around the world.
