‘Ethics, Integrity the missing pieces in Nigeria’s SME growth puzzle’

To crack the next growth phase for small and Medium Enterprises (SMEs), entrepreneurs must be driven by a salad of corporate governance, ethics, and business integrity in order to have access to more financing, promote wealth creation and employment generation post-Covid-19, African policymakers and business leaders have said.

The experts who spoke at the maiden edition of the Africa Business Integrity Network (ABIN) Awards & Recognition event hosted by the Center for International Private Enterprise (CIPE) stated that SMEs can only scale their businesses when they take up the issue of corporate governance and ethics seriously.

According to Segilola Akin-Taylor, Senior Integrity Officer at Africa Development Bank, the lack of corporate governance structure is hindering SMEs from accessing greener investment opportunities.

“Most companies that are sanctioned are small-to-medium-sized enterprises. They do not have processes and policies to prevent corrupt activities from happening, “Akin-Taylor said.

He noted that these developments have hindered most SMEs from accessing financing from multinational organisations such as the African Development Bank (ADB).

Lola Adekanye, Business Integrity and Ethics 1st Lead at CIPE, while there are those businesses that would always be inclined to operate with integrity, the majority of businesses will need some inducement and at least a guarantee of systemic fairness to do things right and stay compliant with laws and regulations.

“Most Nigerians are inclined to do the right thing even though they may not be incentivized to do it, so there is a place to start,” Amy Jadesimi, CEO of LADOL Nigeria and Ethics 1st Committee Advisory said.

Recall, the Credit Bureau Association of Nigeria (CBAN) has stated that despite efforts by the Central Bank of Nigeria (CBN), credit bureaus, and financial institutions to make loans accessible to micro, small, and medium enterprises (MSMEs), only four percent of the 40 million MSMEs in the country have access to credit.

“It is more expensive to be unethical as a company if you are looking for sustainable capital,” Jude Onyeka Chiemeka, Divisional Head, Capital Markets, Nigeria Exchange Limited explains.

Akin-Taylor said that in a bid to remove these SMEs from sanctions, the ADB, which does not provide consultancy services, then faces the challenge of finding consultants that would help them build and implement those programs.

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“SMEs, which are all over Africa, do not know how and where to find compliance support. They lack technical capacity to, they don’t know where to engage consultants to help them, “said Akin-Taylor.

One of the reasons for this implementation gap is that small business does not have access to readily available online information that suits their businesses.

“Most of the compliance programs available online are usually tailored to large companies that do not suit small (5-to-10-person) businesses,” Adekanye said.

Adekanye said incentives are needed to encourage ethics and integrity in business, as it costs more to do business the right way in a highly corrupt business environment.

The annual corruption index ranking by Transparency International has seen Nigeria drop from the 136th position in 2015 to 154 in 2021. This shows that the ethical values and integrity are quickly eroding in the country.

However, businesses that have good corporate governance and are highly ethical tend to attract more investors in the long run.

“At the Nigerian Stock Exchange, we have discovered that investors are likely to invest in companies that possess strong ethical values,” said Jude Onyeka Chiemeka, Division Head Capital Markets, Nigerian Exchange Group Limited.

Over the last two decades, legal and regulatory interventions to curb corruption increased globally in response to the pervasive spread of corruption. Anti-bribery and corruption requirements began to cascade through global value chains, along with a global convergence on recognized standards of business integrity and collective action to reduce corruption. This created new challenges for emerging market economies in attracting foreign direct investment.

To reverse this trend, ABIN was created in 2017 to empower businesses in the region to implement sound corruption mitigation systems that meet internationally recognized standards and are both appropriate for their experiences and adequate for their needs.

In a bid to build an environment with complaint and corruption-free businesses, ABIN has partnered with agents from 13 sub-Saharan countries to help the African business community build capacity to resist corruption and enable them to operate with integrity in alliance with the Global standards of ethical compliance.