Despite extensive government support aimed at boosting Micro, Small, and Medium Enterprises (MSMEs) in Nigeria, the sector has yet to experience the anticipated growth.
Industry experts point to several unresolved challenges, including inadequate infrastructure, soaring operational costs, unreliable power supply, rising operational costs, limited access to finance and regulatory inefficiencies which continue to stifle the development of MSMEs.
These persistent hurdles, they argue, have undermined the effectiveness of support programs and prevented the billions of naira in interventions from translating into meaningful improvements for the sector, leaving many businesses struggling to survive.
The Federal Government through the Ministry of Industry, Trade, and Investment has mobilised substantial resources to aid MSMEs. Initiatives like the N200 billion Presidential Loans and Grant Scheme which was announced in December 2023 in collaboration with the Bank of Industry (BOI), are aimed at revitalising businesses across the country.
As part of the intervention, the Federal Government, through the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), has also facilitated over N9 billion in affordable financing to boost MSMEs.
President Bola Tinubu emphasised that MSMEs were central to Nigeria’s economic strategy, urging both domestic and international investors to tap into the opportunities in the SME sector.
He said that the funding programmes under SMEDAN, led by Charles Odii, the director-general of the agency, aim to provide Nigerian small businesses with capital to scale and innovate.
The Bank of Industry (BOI) also plays a significant role in financing MSMEs by providing financial support to various sectors of the economy. As Nigeria’s primary development finance institution, BOI focuses on promoting industrialisation and economic growth and offers a range of financial products and services to entrepreneurs, startups, and existing businesses, including loans, equity financing, and guarantees.
The bank supports MSMEs through various other financing initiatives.
Olasupo Olusi, managing director and CEO of the Bank of Industry, revealed that so far in 2024, the bank has disbursed N77.65 billion in loans to almost 1,000 MSMEs across the country, helping businesses in sectors ranging from palm kernel oil processing to furniture making.
Read also: FG mobilizes ₦9bn for MSMEs through counterpart funding initiative
According to him, these interventions align with the Federal Government’s efforts to alleviate poverty and enhance food security by supporting enterprises that drive economic growth and create jobs.
The Nigerian Export-Import Bank (NEXIM) provides short and medium-term loans to Nigerian exporters. It also provides short-term guarantees for loans granted by Nigerian Banks to exporters as well as credit insurance against political and commercial risks in the event of non-payment by foreign buyers.
In 2019 the bank disclosed that Nigerian exporters, many of whom are Small and Medium Enterprises (SMEs) got a N24 billion credit facility from the Nigerian Export-Import Bank (NEXIM) within a year.
The Corporate Affairs Commission (CAC) in Nigeria plays a vital role in supporting entrepreneurship by overseeing the registration and regulation of MSMEs, companies and business entities.
The CAC says it has so far registered three million businesses in the country. According to the commission, the formalisation of businesses makes it easier for entrepreneurs to establish legal entities, access funding, and engage in legitimate commercial activities.
The Nigerian Export Promotion Council (NEPC) also plays a crucial role in promoting entrepreneurship in Nigeria by supporting and facilitating export-oriented businesses.
The council provides numerous beneficial programmes for Nigerian exporters and SMEs such as export support programmes, registration for exporters, market research, trade fairs, export workshops and training, advisory and coaching, support for women in export, support in trade promotion services and financial support to help entrepreneurs identify export opportunities, improve product quality, and access international markets.
Yet, despite these robust initiatives, Nigerian MSMEs continue to struggle. Rising fuel prices, erratic electricity supply, high production costs, and a volatile exchange rate remain significant hurdles for businesses.
Abdulrasid Yarima, national president of the Nigeria Association of Small and Medium Enterprises (NASME), noted that energy costs consume up to 50 percent of the production expenses of many small businesses. With the exchange rate now at N1,600 to the dollar, he said businesses relying on imported raw materials face mounting operational challenges.
He added that the high cost of borrowing and insufficient financial literacy was further compounding the problem. Yarima explained that MSMEs, particularly those in the informal sector, face difficulties accessing loans due to poor credit ratings and a lack of financial capacity.
“Many MSMEs do not have the necessary capacity to access government interventions. The government needs to provide more support to ensure that small businesses can qualify for and benefit from these interventions,” he said.
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