All over the world, Small and Medium Enterprises (SMEs) are the lifeblood of economies and one of the major employers of labour.
According to the World Trade Organisation, SMEs account for about 60-70% of the global workforce and constitute about 90% of businesses worldwide.
SMEs are also a significant contributor to the Gross Domestic Product (GDP) of economies around the world. According to reports, in developed economies, SMEs contribute about 55% of the GDP, while emerging economies like Nigeria make up over 40% of the national GDP.
Despite these significant contributions, small and medium-sized businesses have recently faced critical challenges that have severely impacted the sector leading to the mass closure of firms and loss of jobs.
More recently, the devastating impact of the Covid-19 pandemic on various sectors has had a crippling effect on most businesses worldwide. In addition, the impact of the enforced lockdowns resulted in a depleted workforce that hit the production capability and bottom line of many organisations.
This further led to additional job losses and decreased economic activity, leaving countries worldwide struggling to recover. The impact was especially devastating on the African continent, Nigeria inclusive.
In addition to the forced closure of most businesses, the pandemic seriously affected the worldwide logistics supply chain, which was essential to the survival of most SMEs in the nation.
According to a report released in January 2022 by the National Bureau of Statistics and the Small and Medium Enterprises Development Agency of Nigeria, the number of Micro, Small, and Medium-sized enterprises in Nigeria (MSMEs) reduced from about 41.5 million that existed in 2017 to just 39.6 million by the end of 2020.
Before now, MSMEs in Nigeria already had to deal with the inherent challenges prevalent in the country’s business environment and the pandemic and resulting lockdowns made an already dire situation worse.
Although the global easing of Covid restrictions and the gradual reopening of the Nigerian economy seemed to signal recovery for small businesses, the Ukraine-Russia conflict over the past year further complicated matters, the ongoing war has caused its share of supply disruptions leading to an increase in energy prices and fossil fuels like diesel and petrol that most small firms in developing economies like Nigeria rely on.
Despite these challenges, SMEs still form the bedrock of the Nigerian economy contributing over 46.1% to the country’s GDP. This shows the huge impact that small businesses will continue to have in the country as the largest employers of labour and the highest type of business, accounting for over 90% of such firms in Nigeria.
SMEs have largely remained resolute and productive, thanks to financial institutions like Union Bank, who have, from the get-go, recognised how invaluable the sector is to the Nigerian economy.
For over 105 years, the bank has consistently supported small businesses with its dedicated SME Banking proposition and unique product offerings providing access to loans and intervention funding.
Over the years, Union Bank has generously supported Nigeria’s small and medium-sized enterprises with cutting-edge products and solutions that have helped to boost capital infusion and promote effective business practices, leading to increased profitability and business growth.
In addition, through value-adding training programs for business owners that have increased consumer awareness of the dangers and opportunities within their industry, Union Bank has directly benefited more than fifty thousand enterprises.
Women-owned businesses, which according to PricewaterhouseCoopers, make up roughly 41% of the MSMEs in Nigeria, have also enjoyed access to exclusive business support through Union Bank’s αlpher© proposition. αlpher© provides access to unique, innovative products, mentorship programs, and access to business management workshops that have empowered women’s businesses to continue to prosper.
This unique proposition which was conceived to boost enterprise and enable success for women in Nigeria has attracted domestic and international grants and funding opportunities that have greatly improved female-owned establishments.
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As laudable as these kinds of private interventions are, there is still a need for a holistic, collaborative effort between the public and private sectors. Suppose the government hopes to realistically achieve its dream of pulling 100 million Nigerians out of poverty over the next decade; the government at all levels need to come up with adequate plans to transform the SME sector positively.
Some solutions should be tailored toward enabling massive growth in the segment in the next few years.
Deliberately formulated government policies, in addition to upgrading and building critical infrastructures like seaports, railways, and power stations, amongst others, should be a catalyst that will undoubtedly lead to massive growth and profitability of SMEs in the country.
This could catapult Nigeria into one of the top 20 economies in the world in the next couple of decades with a projected trillion-dollar economic output.
Abraham is head, SME products and segment, Union Bank.