Small and Medium Enterprises (SMEs) are important for the growth and development of any economy as they allow for the greater utilization of raw materials, generation of employment, encouragement of rural development, development of an entrepreneurial spirit, mobilization of local savings, forward integration with large industries, provision of regional balance by spreading investments more evenly, the provision of a path for self employment and provision of opportunity for training workers. According to the World Bank in 2004, SMEs enhance competition and entrepreneurship, and hence, they have external benefits on economy-wide efficiency, innovation, and aggregate productivity growth. From this perspective, government supports for SMEs will help countries exploit the social benefits from greater competition and entrepreneurship.
The importance of economic growth to any nation cannot be over emphasized. With the dip in the price of crude oil in the international market, a period of stagflation, usually characterized by inflation and slow growth has set in. Nigeria’s over dependence on revenue from crude has been a bane in the development of key sectors of her economy and the time for the diversification of her economy is now.
In developing nations and emerging economies like Nigeria, SMEs have historically been a major player in domestic economic activities, especially as the main provider of employment opportunities, and, hence, a generator of primary or secondary sources of income for many households. For low income or poor farm households in rural areas, SME activities are especially important. These enterprises have also been an important engine and a driving force for the development of local economies and communities and families. Approximately 96% of businesses in Nigeria are Micro, Small and Medium Enterprises. There are over Twenty Million SMEs in Nigeria, providing employment to around Forty Million Nigerians. However, historically SMEs have been neglected by the government.
The major problems faced by SMEs in Nigeria include; difficulty in access to finance, high cost of borrowing, corruption, bureaucracy, unnecessary taxes, lack of support by the government (local, state and federal), inadequate power supply, over dependence of imported goods, insecurity, poor transport infrastructure, non availability of requisite legislation and a host of other demons.
Whether we like it or not, there are not enough jobs in the corporate world for our youth. However, from a young age Nigerian’s are feed with rosy images and rhetoric about working in corporate establishments and the dream of majority of university graduates is to work in such establishments. The reality however, is that majority of these graduates will not find ‘corporate’ jobs and even when they do, they will most likely be given roles that have no relationship with their primary course of study in the university.
It is time to stop wasting our time and the lives of our children. Support should be given to entrepreneurs to support innovation, competition and ultimately lead to economic growth. One of the easiest ways to spur an economy is to create an atmosphere for SMEs to thrive. Understandably commercial banks shy away from funding SMEs due to the risks inherent in lending to SMEs, accentuated by the problems SMEs face which reduce their earning potentials.
In Chinese schools, students are encouraged to be entrepreneurial as they are informed from an early age of the rigours of getting a job in the formal sector. This spirit has spurred a people and ultimately their nation to become arguably the largest economy in the world. Recently in Kenya, a license was granted to a Venture Bank to resume operations in 2016. This is a step in the right direction and a model worthy of emulation by Nigeria. The goal of the Venture Bank will be to support start up’s, young businesses and SMEs by providing affordable funding, expert advice amongst others.
A look at the Asian Tiger’s will show that SMEs have been engine for development and the growth of exports of non-oil and gas, particularly in the manufacturing sector. In countries like South Korea, Taiwan, Hong Kong, and Singapore, successful cases of SME development have directly contributed to trade and the adoption of export-oriented strategies. The experiences of these countries indicate that SMEs can compete effectively in both the domestic and international marketplace and spur economic growth.
There have been numerous policies formulated and a handful of agencies established by the government to promote and support SMEs, however, the sincerity of the intentions of past administrations if evident in the current state of these agencies and the usefulness of the policies over the years. The government can support SMEs either by direct interventions (specially designed SME credit schemes) or indirectly (the development of infrastructure and the creation of a business-friendly environment) for the growth of SMEs.
If and when the government becomes serious about supporting SMEs, we should expect an increase in output of existing SMEs, a reduction in unemployment and indirectly a reduction in crime, an increase in foreign exchange earnings, a diversification of the economy and Nigeria’s revenue base and a revival of the industrial sector.