• Sunday, March 03, 2024
businessday logo


Charting a new course for Nigeria’s 37m SMEs


recent micro, small and medium enterprises survey conducted by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in collaboration with National Bureau of Statistics (NBS) shows that Nigeria has about 37 million MSMEs.

These MSMEs, according to the survey, account for 48 percent of the country’s gross domestic product, while also taking 60 million people off the labour market.

Olusegun Aganga, immediate past minister of industry, trade and investment, who disclosed this in May said: “The National MSME Policy envisions an MSME sub-sector that can deliver maximum benefits of employment generation, wealth creation, poverty reduction and growth to the Nigerian economy. This is because everywhere in the world, MSMEs are the biggest employers of labour.”

One critical take-away from the survey is that MSMEs play a significant role in the economy with regard to job creation, GDP contribution, wealth creation and poverty reduction.

However, available evidence shows that a lot of factors are stacked against the entrepreneurs or operators of these businesses.

A recent survey by The Economist shows that an average company in Lagos expends 956 hours per year in paying taxes, compared with the Sub-Saharan African average of 310 hours, and the OECD average of 175 hours.

The research report shows that the country is one of the worst in the world in terms of registration and operations of business.

But registration is not just the issue. The more worrisome factor is multiplicity of taxes arising from the perception of government institutions that small businesses are cash cows.

Remi Bello, president, Lagos Chamber of Commerce and Industry, recently drew attention of Nigerians to the steps taken by the Consumer Protection Council to embark on the registration of products of manufacturing firms, which is already being done by National Agency for Food and Drug Administration and Control (NAFDAC) and the Standards Organisation of Nigeria, two different government agencies.

The business community wonders why inspection done by SON cannot be accepted by NAFDAC and vice versa.

The local government system, where accountability is virtually absent, also comes up with taxes which it has no constitutional right to. Mahmud Othman, council member of LCCI and consultant for AG Leventis, said it was laughable that local government authorities would visit public liability firms, demanding irrelevant charges such as radio and television fees.

“The problem is that once you challenge them, they go to customary court. Decree No 21of 1998 spelt out taxes payable to each level of government.   Most of the taxes they collect today are illegal. There is a provision for a local government, because of its peculiarity, to come up with a specific levy. But due to indiscipline, local governments come up with all forms of taxes. But the Constitution is clear on what they should do if they need to come up with taxes,” Othman said in an interview with BusinessDay.

The Economist identifies that MSMEs are confronted with the problems of regulations and costs of imports. According to the report, 62.5 percent tariff was levied on imported books in Nigeria in 2014. This was meant to protect local printing companies. However, it nearly destroyed flourishing   publishing businesses that had been forced to import books due to the low quality of domestically produced ones

The Economist cites the case of Bibi Bakare-Yusuf, founder of publishing house Cassava Republic, based in

Abuja, saying she had to dispose of 20,000 books printed in Nigeria because of their poor quality.

What it implies is that there must be a careful study of the local capacity before tariffs are raised.

Apart from these, most importers and exporters are confronted with the endless port gridlocks and the menace of tanker drivers in link roads to the ports. A clear example is the Apapa area of Lagos where gridlocks halt movement of goods as well as raw materials to factories. The exporter is also faced with this challenge as movement of goods out of the country takes longer than necessary, according to Tunde Oyelola, chairman, Manufacturers Association of Nigeria Export Group.

The issue of corruption also cripples SMEs. The Economist quotes Jason Njoku, founder of iRoko Partners, one of the largest online distributors of African movies and music, sharing his encounter with a customs official while  attempting to bring IT equipment into Lagos International Airport from London.

According to the report, the official sought to impose a $4,000 spot customs fee, with just an exchange-rate calculation on a mobile phone.

There was no online resource through which Njoku could establish the actual duty and customs charges owed.

“All stakeholders—government, financial institutions and SMEs themselves—can contribute to the effort. For government, cleaning up customs and tax processes, avoiding volatile macroeconomic policy making and simplifying burdensome gulations would be good targets for reform,” The Economist said, in the report entitled, ‘Enabling a more productive Nigeria: Powering SMEs’.