SMEs – The Backbone of Nigeria Economy

SMEs  – The Backbone of Nigeria Economy

The United Nations industrial development organization (UNIDO) recently disclosed that small and medium-scale enterprises account for 96 percent of all business activities in Nigeria.

The regional director of UNIDO, Mr. Jean Bakole disclosed that the MSME sector in Nigeria currently contributes about 50 percent of the GDP, and has provided over 48 percent of all employment opportunities in the country.

Unfortunately, despite the major roles these SMEs play in the country’s economy, they are still faced with a myriad of challenges that stifles their growth. Nigeria is home to approximately 40 million MSMEs that are employing 87.9 percent of the labor force.

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Small and Medium enterprises play major roles in most economies, most especially in developing countries. They account for the majority of businesses globally and are major contributors to job creation and global economic development.

According to an estimation by Worldbank, 600 million jobs will be needed by 2030 to absorb the growing global workforce, which is why SMEs development should be a top priority for many governments around the world. In most emerging markets, most formal jobs are generated by SMEs which see them create 7 out of 10 jobs.

However, the operation of SMEs in most countries, with Nigeria inclusive, is not usually smooth. One major challenge these SMEs face is lack of access to finance to grow their business.

Among other problems are stiff competition from larger companies, low capacity utilization, lack of management strategies, difficulties in sourcing raw materials, etc. Due to these tons of problems that are currently ravaging the SMEs ecosystem, most of them in Nigeria die within their first five years of existence, while only about five to ten percent survive, thrive, and grow to maturity.

No doubt the unstable policies of the government has also caused some of these SMEs to crumble, also not forgetting multiple taxations that have been a problem, especially given the role of tax consultants and agents hired by the local governments.

They tax these SMEs on everything in their bid to generate revenue without considering its adverse effects on these businesses. The government must understand that the growth of SMEs is very pivotal to the growth of the economy, therefore they should be given a conducive environment to run their businesses, as anything that stifles or poses a challenge to their growth should be jettisoned.

In every economy in the world, it is an established fact globally that SMEs play a very vital role in economies which is why they are often referred to as the engine of economies. Since one major problem of these SMEs is access to finance, therefore there is a strong need for the government to intervene in funding these businesses by making credit facilities available to all sectors of SMEs.

These SMEs have for years called on the government for support, and it is ideal that the government heed to their call. The government keeps talking about tackling the high unemployment rate in the country which rose from 27.1 percent to 33 percent in the second quarter of 2020.

One thing they must understand is that once these SMEs are properly funded, the issue of unemployment among youths will be drastically reduced, because these SMEs in Nigeria account for 84 percent of employment in the country.

Also, as much as the government is saddled with the responsibility of creating an enabling environment for SMEs with financial support, big organizations can also play a role by supporting these SMEs either through funds or partnership. Once problems challenging these SMEs are tackled, Nigeria’s economy will no doubt experience a massive turn around.

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