SMEDAN: Moving to End Unemployment, Poverty


With Nigeria’s unemployment rate rising from 13.3 per cent in the 2nd quarter to 13.9 per cent in the 3rd quarter of 2016, job creation has become a priority. Thus, the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) is saddled with the task of facilitating the growth of micro, small and medium enterprises to reduce unemployment and poverty in a challenging era. Abimbola Akosile writes

Global Statistics

Small and Medium Businesses play important role in the economy of nations all over the world. The United States Bureau of Censors 2010, revealed that 50 per cent of private non-agricultural GDP had been contributed by SMEs during the last decade and were also responsible for 98 per cent of the total share of exports.

In Canada, SMEs contributed 25 – 41 per cent of GDP and control 78 per cent of private jobs according to Industry Canada, key small business statistics 2013. A World Bank report revealed that in the European Union (EU) SMEs represent 99 per cent of an estimated 19.3m enterprise and provide about 65 million jobs, which is two-thirds of all employment in the EU economy by 2010.

In Latin America, about 80-90 per cent of companies are micro enterprises. In Columbia, SMEs account for 36 per cent of all the jobs and 63 per cent of industrial jobs. SMEs make up 90 per cent of businesses in the Asia Pacific Economic Cooperation (APEC) zone. These offer 60 per cent of the jobs to the total workforce and contribute 30 per cent in the exports.

In Nigeria, there are over 17 million of such small businesses that generate employment in various sectors of the economy. The problems however, are that they mostly: operate an informal structure, lack skill and experience to grow their businesses from one level to another, maintain no financial record and as such can’t quantify the value of their businesses or the actual value they add to the economy. Also, most have no bank accounts and so the culture of savings and financial management is not fully imbibed.

Progressive Act

It was in recognition of these facts that the Nigerian government proposed a bill seeking to establish an agency that would facilitate the development of small and medium businesses. In 2003, the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) bill was signed into law by the administration of Chief Olusegun Obasanjo.

The Act seeks to establish an agency that will facilitate the growth and development of small and medium businesses in the country. The primary objective is to promote the growth and development of small and medium enterprises to achieve remarkable improvement in their activities that will lift them out of poverty unto financial well-being.

SMEDAN, therefore, began the challenging journey of formalising this large and diversified sector into an articulated economic hub for the benefit of its stakeholders.

MSME Spectrum

Micro, Small and Medium Enterprises (MSME) is a broad spectrum of economic operators that consist of artisans, craftsmen, weavers, traders, carpenters, street hawkers, vendors down to shops and supermarket retailers, bakers, factory owners and so on.

Meanwhile MSMEs are recognised based on accepted criteria as encapsulated in the National Policy Framework for MSMEs and each group was defined using Assets and Employment parameters thus:-micro with less than 10 employees, less than N10 million asset; small with between 10 and 49 employees and less than N100 million asset; and medium employing between 50 and 199 persons and asset of between N100 and N1 billion.

This way it is easier to group and rank different businesses within the sector for training, financing, counseling and other business development support needs. It will also facilitate seamless transition of businesses from one group to another.

In the year 2010, a survey of Micro, Small and Medium Businesses was conducted by SMEDAN in collaboration with the National Bureau of Statistics (NBS) and the results were startling. Out of the 17,284,671 MSMEs in the country, about 17,261,753 (99.87 per cent) were Micro enterprises, while 21,264 (0.12 per cent) were Small and only 1,654 (0.01 per cent) were Medium. In a nutshell, the entire MSME sector was at Micro level; informal and under-developed.

The challenges faced by the sector include among others, lack of basic business skills to develop their businesses; lack of standardisation of products; lack of access to available market; high operating cost mainly due to poor power supply which shifts the burden to alternative power sources, leading to high production cost, low profit margin and lack of affordable finance.

Vital Intervention

Responding to the challenges, SMEDAN launched the National Enterprise Development Programme (NEDEP) to arrest the problems militating against the development of SMEs in the economy.

According to a document obtained from the agency, it is strategically structured to deliver the cardinal objective of creating at least one million jobs every year within the MSME sector. SMEDAN came up with nine priority agenda to be anchored by the trio of SMEDAN, Bank of Industry (BoI) and the Industrial Training Fund (ITF).

The trio aimed to achieve an institutional framework, developing a revised national policy on MSME; implementation of a robust delivery and monitoring structure; increasing access to affordable finance; increasing access to market and promoting youth inclusion among others.

Youth Inclusion

Many agreed that the inclusion of youth into the NEDEP agenda was the most revolutionary notion that would not only broaden the horizons of SME businesses in the country but would equally address the challenges of unemployment and youth restiveness.

Seventy five per cent of the population of Nigeria fall within the youth bracket, and the nation can’t progress without taking into cognizance the role its youth would play in shaping the destiny of the country.

The engagement of youth in NEDEP was in two categories: the Tertiary Institutions Entrepreneurship Development Programme (TINEDEP) meant to develop entrepreneurship talent at the undergraduate level and entrench the programme framework in all universities across the country and the National Students’ Entrepreneurship Programme (NSEP) anchored by SMEDAN in collaboration with an NGO called the Student Advancement of Global Entrepreneurship (SAGE).

It is a global enterprise development programme that encourages young students to form and run social enterprise businesses. It teaches students how to create wealth, help others and their communities.

The third silent arm of the youth engagement is the Youth Corps Entrepreneurship Programme which target Youth Corp Members at orientation camps. It is run by the NYSC secretariat in collaboration with the Bank of Industry which provides seed capital of up to N2 million to graduating entrepreneurs.

Positive Agenda

Top on the agenda of the new management team of SMEDAN led by Dr. Dikko Umaru Radda was the need to review the Act establishing the agency to position it properly for the discharge of its mandate. A team was drawn up to review the Act and make necessary amendments. Sources at the National Assembly indicated that, the bill has scaled through second reading, public hearing had been concluded on it and it is awaiting passage by the National Assembly for the President to assent to it.

The NEDEP programme which started earlier on, recorded limited success due to enormity of the tasks involved and the diversity of issues in it. To realign the programme for proper implementation, the minister of Trade, Industry and Investment, Mr. Okechukwu Enelamah, ordered the widening of the stakeholders to include all agencies under the ministry so that they will be able to provide a one-stop-shop model of dealing with the issues involved.

SMEDAN convened the first all stakeholders meeting in Abuja. In attendance were: Bank of Industry, Corporate Affairs Commission, Nigerian Export Promotion Council, National Automotive Design and Development Council, Nigerian Investment Promotion Council, Standards Organisation of Nigeria, Industrial Training Fund, a representative of the Federal Ministry of Industries, Trade and Investment and the host SMEDAN.

The aim was to make all the agencies to put heads together to provide common solutions to problems affecting the SMEs in the business environment. At the end of the deliberations, a technical committee was set up and charged with the responsibility of designing a framework that will guide the agencies on how to deliver the mandate of NEDEP.

In order to corroborate the effort of the agencies and the ministry in general, SMEDAN is coordinating the launch of Business Clinics across the country. Such programme has been launched in Aba, Abia State and Ilorin, Kwara State.

The clinic is to serve as a one stop shop for advisory services to MSMEs. Issues of registration, product standardisation, business development plans, access to finance and financial management could be addressed by staff members of different agencies pooled together.

Made in Nigeria

The penchant for foreign goods has impacted negatively on Nigeria’s economy with local industries going into extinction and leaving a large cache of articulated factories. The closure of local industries has also created unwarranted level of unemployment across the nation.

To reverse the trend, the federal government through the Made in Nigeria product show commenced the production of essential products consumed by the local markets. It has promoted SME products through trade shows. One example in focus is the Made in Aba Trade show organised in collaboration with Senator Enyinnaya Abaribe of Abia South Senatorial District.

This annual event has culminated in trade deals between the Aba Shoe manufacturers and the Nigerian Army for the production of foot-wears worth hundreds of millions of naira. It is working assiduously to promote information exchange on agricultural commodities and other SME products nationwide. MSMEs would fill gaps in the supply chains of the corporate giants for the benefit of all.

Access to Finance

While made in Nigeria is a necessary panacea to the lingering unemployment problems in Nigeria, access to finance has stunted growth in the MSME sector. The 2010 survey revealed that funding in the sub-sector (Micro enterprises) was mainly from personal savings as commercial lending rates from banks were as high as 20 to 30 per cent for MSMEs.

The survey indicated that less than 1 per cent of SMEs had accessed bank finance in the last three years. The reasons are not far-fetched; those enterprises are not registered to give them legal status that can borrow for commercial undertakings, they can’t absorb high cost of borrowing from the banks and because of the way they operate, recovery is a daunting task. Additionally, many of the entrepreneurs reside in rural areas where banking services are not available.

Devt Bank

A relief has come the way of MSMEs in Nigeria with the unveiling of the Development Bank of Nigeria (DBN). The bank is financed by the trio of the World Bank, Federal Government of Nigeria and the African Development Bank. With a seed capital of $1.3 billion, DBN would certainly fill in the funding gaps in the MSME sector.

The bank would run a wholesale window, lending directly to Micro Finance Banks who will in turn lend to MSMEs. This way, most of the problems associated with access to finance in terms of rates, conditions and outreach would be addressed.

Industrial Devt Centres

Industrial Development Centres (IDCs) are workshops created by the federal government to train and develop middle level manpower in woodwork and metalwork for our industries. This is government’s strategy to complement technical manpower deficiency in the industrial axis of the economy.

It started in the 70s and run through to the 90s. All in all, there are a total of 23 IDCs spread across the country. Some of them have been operating epileptically while others have become moribund. A more alarming problem is that of encroachment. Most of the lands allocated to such Centres have been encroached over time due to lack of perimeter fencing occasioned by poor funding, while in some cases equipment have been vandalised.

In 2012, the Federal Ministry of Industries, Trade and Investment handed over those IDCs to SMEDAN. Recently, SMEDAN undertook a tour of those IDCs in Kano, Zaria, Katsina, Aba, Bauchi, Ilorin, Lagos, Oshogbo, Owerri, Idu (Abuja) and Port Harcourt and studied the level of encroachment and dilapidation in the centres.

On whether those IDCs have lost their meaning in the nation’s drive towards economic development, the DG SMEDAN, Dr. Dikko Umaru Radda said: “No, but their functions will have to change in tune with our transformations. I want us to know that we are not looking at Nigeria in isolation. We are looking at it from the global context.

“Also, SMEDAN has secured grant from the African Development Bank (AfDB) to undertake a study of the IDCs and come up with a blueprint on how to convert them to parks.

“Our products compete with imported ones that are products of high tech industrial equipment. The finishing and the quality are superior and superb. More so, economic diversification has transferred ownership of many government-owned corporations to private individuals and institutions.

“The need to supply manpower to those industries may still be relevant but not in the manner the IDCs were designed. On the other hand, consider the hundreds of thousands of artisans, craftsmen and women, manufacturers and other menial job handlers who squat in many improper places to carry out their businesses. They provide jobs, pay tax and generate wealth and yet have no proper workplace.

“This is what informed the decision of SMEDAN to convert these IDCs to cluster parks. A cluster park is where several groups of similar vocations are assembled together under one roof to run their businesses. The advantages are that it makes them easily accessible by the customers, they can come together to form cooperative society and benefit from financing and other incentives.

“It speeds up specialisation and would enable government to address their infrastructural needs such as electricity, water, road, etc. They can equally enhance security around the parks and most importantly reduce the level of environmental pollution and improve hygiene in the neighborhood”, Radda said.