HELPING SMALL BUSINESSES TO GROW

The small and medium scale enterprises deserve adequate attention

In recognition of the fact that the Micro, Small and Medium Scale Enterprises (MSMEs) sector constitutes the spine of any country’s economy, the United Nations designated last Friday (June 27) as the International MSME Day. With the theme, ‘Business for MSMEs – Connecting the Entrepreneurs’, the 2025 International MSME Day was dedicated to raising awareness about the vital contributions of micro, small, and medium-sized enterprises to sustainable development and the global economy. That there was no such awareness about the event in Nigeria reflects official disposition to small businesses.

 Meanwhile, MSMEs account for 90 per cent of businesses, 60 to 70 per cent of employment and 50 per cent of the Gross Domestic Product (GDP) worldwide, according to the World Bank. In Nigeria, the Small and Medium Enterprises Development of Nigeria (SMEDAN) reports that MSMEs currently represent 96 per cent of the businesses in the country and contribute 75 per cent of the national employment. Unfortunately, this is a sector that has been neglected despite all the rhetoric by the government at all levels. Besides the fact that they account for a significant percentage of businesses in Nigeria, they can help to address the challenge of insecurity if properly harnessed.    

Indeed, a country with over 37 million small businesses should not by any means ignore or look down on the almost limitless potential for inclusive and sustainable economic growth that could be harvested from MSMEs. While the new tax laws by President Bola Tinubu make exclusive provisions for small businesses, access to credit remains an issue. Across the world, micro-lending carries the image of social investment, classified as a development issue in the mould of education, health, and related policies. The scheme provides financial services to MSMEs in trade, tailoring, carpentry, fishing, and transportation, etc.

Unfortunately, according to most estimates, fewer than five per cent of the MSME in Nigeria can access any form of funding from financial institutions. Not only are the conventional banks not cut out for long term lending needed by MSMEs, but these banks are also more comfortable lending to short-term business ventures as against start-ups that would require longer gestation period to pay back. 

Earlier in the year, the federal government established a council headed by Vice President Kashim Shettima to work in collaboration with other stakeholders to ensure growth in the MSMEs space in the country. But the Shettima council should learn from the past. In 2005, the Central Bank of Nigeria (CBN) came up with a regulatory and supervisory framework for the establishment of microfinance banks (MFBs) as a means of providing access to financial services to the unbanked population. The MFBs are allowed to solicit deposits, which are guaranteed by the Nigeria Deposit Insurance Corporation (NDIC). That the whole idea failed is one area the recently constituted National Council on MSMEs should be looking at in its efforts to interface with the CBN to enhance the financing of small businesses in the country.

The impediments against the growth of MSMEs in Nigeria are very clear. One, far too many government agencies impose undue levies on them thus making it increasingly difficult to do business in Nigeria. Two, the capital base of micro finance institutions is too meagre to mobilise domestic savings and promote banking culture among low-income groups. Three, microfinance banks are competing with online banks which do not have to set up elaborate structures such as offices and related structures.  Four, many of the MFBs resort to using criminal and unorthodox methods, including deploying the services of thugs to compel their borrowers to pay. 

With the latest report by the World Bank that extreme poverty is growing faster and taking a devastating toll on Nigerians, this is the time to help small businesses to grow.

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 Far too many government agencies impose undue levies on them thus making it increasingly difficult to do business in Nigeria