By FBNQuest
We discuss some of the highlights of the Nigerian Economic Summit Group’s (NESG) pre-summit virtual event held yesterday, titled – Key Drivers for Economic Prosperity: A Critical Look at Entrepreneurship Policies.
The special focus was on Micro, Small, and Medium Enterprises (MSME). MSMEs play a vital role as catalysts for economic growth and development. According to a 2016 report by the European Development Finance Institutions (EDFI), MSMEs play a key role in job creation, providing two-thirds of all formal jobs in developing countries and 80% in low-income countries.
Based on information shared by panelists, MSMEs account for c.43.3% of Nigeria’s GDP and well over 80% of its workforce.
One of the speakers mentioned that the results of a survey, conducted jointly by the National Bureau of Statistics and the Small and Medium Enterprises Development Agency of Nigeria, revealed a 4.5% decrease in the number of MSMEs to 39.6 million in 2021 from 41.5 million in 2018 due to unfavourable macroeconomic conditions.
The survey discovered that out of the 39.6 million MSMEs, 99.8% are essentially micros. Due to size disparities within the micro-enterprise group, the nano-enterprise category was created. Nano-enterprises are defined as companies with a staff of one to three people and annual revenues of less than NGN3m.
The managing director of the Development Bank of Nigeria (DBN) touched on the huge funding gap for MSMEs. He added that a 2019 KPMG report estimated the gap at c.NGN48trn while also noting the low share of banks’ lending to MSME, which currently stands at c.5%.
The DBN has disbursed about c.NGN572bn in the last 5 years through various financial institutions for on-lending to around 235,000 MSMEs.
Along with the well-known difficulties of inadequate access to affordable financing, MSMEs also confront issues regarding market access, inadequate policies and regulations, as well as insufficient capacity and training.
A representative of the federal minister of industry, trade, and investment disclosed that some policy initiatives are being developed to address some of these challenges.
Examples of such initiatives include the development of a platform to consolidate available funding sources for MSMEs from financial institutions and other private sources, and the establishment of an MSME development fund to be operated on a PPP basis.
Others, include the creation of a rating system for financial institutions that will be scored based on support for MSME businesses, as well as the development of systems to provide subsidies for MSMEs’ capacity building amongst others.
The panelist who represented the Nigerian Export Promotion Council (NEPC), mentioned a few of the agency’s support initiatives for MSMEs, such as facilitating the ease of obtaining export documentation and necessary certifications. She also disclosed that domestic export warehouses had been set up by the NEPC to streamline the export procedure, particularly inspections by customs and other regulatory agencies.
The NEPC, has also established export trading houses in cities like Cairo, Lomé, and another city in Kenya, to enable exporters to take advantage of the African Continental Free Trade Area (AfCTA).
