In light of this year’s Micro, Small, and Medium Enterprises (MSMEs) Day, which took place on Thursday, June 27, 2024, it has become clear that our SMEs and entrepreneurs must be given a more prominent role in our economy due to their significant contributions to nation-building and economic emancipation.
Understanding what constitutes an SME is crucial. A review of Nigerian laws, including the Companies and Allied Matters Act (CAMA) 2020 and the Finance Act 2023, provides clarity on this. According to Section 394(3) of CAMA 2020, an SME is a private company with a turnover and net assets below ₦120 million and ₦60 million, respectively. It must not have any foreign members, and its directors should hold at least 51 percent of its equity share capital. The Finance Act 2023 further defines a small company as one with an annual gross turnover of ₦25 million or less.
Read also: Only 12% of MSMEs get loans from traditional banks – report
Ayozie D.O. (2013) detailed the elements of small-scale business operations in Nigeria, which include sole proprietorships, partnerships, joint-stock companies, and cooperative societies. Currently, there are nearly 45 million SMEs in Nigeria, making them one of the largest employers in the country and essential to our national growth and success.
Olukayode Pitman (2019) emphasised that SMEs and micro-enterprises add vitality to a country’s economy by opening and spreading distribution channels nationwide, thus connecting the dots and providing millions of jobs for unemployed youths. He asserted that the backbone of any economy lies in the robustness of its SMEs and micro-enterprises.
Reports indicate that SMEs contribute significantly to economic growth through job creation, poverty alleviation, increasing GDP, promoting entrepreneurial drive, opening new markets, supporting large retail businesses, and providing affordable goods and services. In the long run, SMEs can drive national growth and development through various taxes. They also drive innovation and entrepreneurship, boosting the gross national product (GNP) and per capita income.
Despite these benefits, SMEs in Nigeria face significant challenges, including excessive compliance burdens, power issues, insufficient capital, obsolete technologies, multiple taxes, and a lack of basic infrastructure. Mr. Taiwo Oyedele, FCA, highlighted these strains on SMEs’ working capital and low-margin businesses.
However, both past and present governments have introduced supportive intervention schemes aimed at aiding SMEs. These include exemptions from Company Income Tax (CIT) and Education Tax (ET) and statutory audit requirements. The Finance Act also grants small and medium-sized companies engaged in primary agricultural production an initial tax-free period of four years, extendable by two more years based on performance.
Additional interventions include the Youth Enterprise with Innovation in Nigeria (YOUWIN) scheme, the Youth Employment in Agriculture Programme (YEAP), the Project Act Nollywood with $200 million grants, the FGN/CBN ₦200 billion SME financing scheme, the Subsidy Reinvestment & Empowerment Programme (SUREP), the Graduate Internship Scheme (GIS), the mandatory setting aside of 10 percent of profit after tax (PAT) by all deposit money banks for SMEs growth, SMEDAN, NEXIM support for SMEs, Bank of Industry (BOI) support for SMEs, Microfinance Bank (MFB) soft loans, and the African Development Bank’s (AfDB) $500 million support for SMEs in 2021.
Read also: Mbah bags MSMEs award, restates commitment to raise Enugu economy to $30b in 4 years
During the 2024 International MSME Day, WEMA Bank Plc advocated for digital empowerment for MSMEs to drive sustainable economic development in Nigeria. Calls were made to develop strategies for the continuous growth and development of the sector.
Holistically, SMEs offer numerous benefits: job creation, GDP growth, export financing, entrepreneurial innovations and inventions, technological advancement, private sector development, support for manufacturing and industrial sectors, skill development, poverty alleviation, regional development, supply chain linkage, empowerment, and income generation for individuals and the government.
SMEs are a vital tool for employment generation and nation-building.
Kingsley Ndubueze Ayozie MSc (Finance) Lagos, MBA, ACSI (UK), FCTI, FCA – a Public Affairs Analyst and Chartered Accountant, writes from Lagos.
