SMES AND THE SCUML IMPEDIMENT
We cannot afford to create needless bureaucratic hurdles in the path of small businesses
Small and medium-sized enterprises (SMEs) play a major role in most economies, particularly in developing countries such as Nigeria. They account for most businesses worldwide and are important contributors to job creation, poverty alleviation and economic growth. With the Small and Medium Enterprises Development of Nigeria (SMEDAN) reporting that SMEs in Nigeria represent 96 per cent of the businesses in the country and contribute 75 per cent of national employment, this is not a sector that can be ignored without dire consequences.
However, the Lagos Chamber of Commerce and Industry (LCCI) recently cited a study which revealed that only 21 per cent of SMEs in Nigeria survive within three years. The United Nations Industrial Development Organisation (UNIDO) Investment and Technology Promotion Office in Nigeria put the figure at 20 per cent. According to UNIDO, “although everybody in Nigeria desires to become an entrepreneur, only 40 per cent of the dreamers get to start, but no more than 20 per cent survive.” UNIDO called for the formulation of effective strategies to address the increasing inability of SMEs to grow in the country.
The Central Bank of Nigeria (CBN) had in the past established numerous programmes to support SMEs but with very little to show for such efforts. For instance, in August 2013, the CBN launched the Micro, Small and Medium Enterprises Development Fund (MSMEDF) with a share capital of N220 billion. The Fund aims to enhance the access to financial services by channelling single-digit loans at nine per cent interest rate to them, through the Primary Finance Institutions (PFIs). When the intended end users could not access the facility, the National Collateral Registry (NCR) was introduced. Yet, the problem persists.
Many factors account for the uninspiring state of small businesses in Nigeria. The recent report by a national newspaper that many of them have been struggling to open business accounts over the Special Control Unit Against Money Laundering (SCUML) certificate gives cause for worry. SCUML was established by the federal government in September 2005 in compliance with the Money Laundering (Prohibition) Act 2004 which was repealed and amended to Money Laundering (Prohibition) Act 2011(as amended) and most recently, to the Money Laundering Prevention and Prohibition Act, 2022. It was part of the measures to implement the Financial Action Task Force (FATF) Recommendations on Anti- Money Laundering/Combating the Financing of Terrorism (AML/CFT) in Nigeria.
It is already an established norm that the first step to open such an account is to register business name with the Corporate Affairs Commission (CAC), followed by a Tax Identification Number (TIN) obtained from the Federal Inland Revenue Service (FIRS). Regrettably, despite that SCUML listed some of the businesses that require the certificate, banks are creating confusion among SMEs owners by insisting on the certificate for virtually all business account names. This is not only a disservice to efforts to grow the economy, but also antithetical to the CBN policy target of achieving 95 per cent financial inclusion by 2024. While the federal government continues to indulge in chest-thumping that it has improved the ease of doing business environment, this is one of the toxic drawbacks that must be quickly resolved.
The economy is in dire need of stimulation, and no effort should be spared to encourage SMEs which are veritable vehicles for growth. Already, there is a litany of factors inhibiting SMEs in the country. They range from multiple taxation, energy crisis and access to finance, among others. At a period when we need to make conscious efforts to address these problems, we cannot be creating needless bureaucratic hurdles that place impediment on the establishment of small businesses in Nigeria. The authorities should look at the issue of SCULM.