Unlocking the SME potentials in an emerging market

Truth be told, the future drivers of economic growth and long-term sustainability, especially for an emerging market like Nigeria and other African countries, lie within the potential and active development of the Small and medium-sized enterprises sector.

In fact, in Nigeria, SMEs have been progressively perceived as an essential means by which development can speedily take place, going by their numbers and the capacity to create employment and ultimately, contribute to the country’s Gross Domestic Product (GDP).

Figures released in a recent survey jointly conducted by the Small and Medium Enterprises Development Agency (SMEDAN) and National Bureau of Statistics (NBS), show that the number of micro, small, and medium scale businesses in Nigeria grew by 12 percent to 41.543 million in 2017 from 37.067 million in 2013.

The survey also revealed that MSMEs’ contribution to exportation accounted for 7.27 percent of total exports. SMEs also account for the employment of about 60 million people. Meaning, SMEs have become the most critical employment generation vehicle, entrepreneurial training, and development in the country, but they face daunting challenges.

These challenges that have impeded the growth of Nigeria’s SME sector, range from demeanour and propensities to go through natural related components, the flimsiness of governments, and successive government strategy changes and somersaults.

But for SMEs, touted as the most critical sector of the economy to accomplish the objectives of creating employments and stimulating development and improvement of the economy, these challenges must be addressed head-on with some fundamental dynamics surrounding their internal and external environment being put to work.

Key to addressing these challenges is the adoption of technology innovations and deployment of infrastructure. Despite globalization, many SMEs operate their businesses the conventional ways, resulting in low-level productivity, low-quality products, and exploring small/local markets. Also, poor infrastructure is a huge source of frustration for SMEs trying to catch up to today’s economic landscape. This is particularly true for businesses whose model involves manufacturing, transportation and leverages on technological advancement. Lack of these basic amenities has led to the extremely high cost of operating business growth and viability.

A way out of the quagmire is for the Nigerian government at various levels to formulate policies aimed at improving and empowering the SMEs’ growth and development. Example of China’s State-Owned Enterprises (SOE), which were transformed into Small and Medium Non-SOE and provided an opportunity for more SMEs to be established in China readily comes to mind.

Also, considering the current unemployment rate, which stands at above 33.5 percent in Nigeria, there is no better solution than the active engagement of Nigerian Youth through the SME approach, a route promising enough to drive massive economic growth. This will empower the Nigerian youthful population made up of young, vibrant, skilled, and unskilled youth to develop themselves.

The World Bank has estimated that Nigeria’s population will grow by 2.6 percent annually, and going by the National Bureau of Statistics (NBS), the unemployment rate of 27.1 percent in Q2 2020 and the projection of a 4 percent YOY increase in unemployment, it is therefore suggested that the employability gap and high dependency rate be addressed by engaging technical schools actively and revisit our institutions’ curriculum.

Another quick solution to this futuristic problem of unemployment is to integrate SME skill programs in the curriculum, build more technical schools to reduce dependency rate, improve on existing infrastructure (road, rail network & power generation), encourage more public-private partnership policies, and introduce policies that support SMEs to excel.

The government can also enhance her engagements with the SMEs, with her many agencies like the NIPC, SMEDAN, and FIRS, and create central policies where these SMEs can showcase their products/services and sell to the global market, while ensuring adherence to international standards.

Adewale Adeyipo is the Chief Executive Officer of CWG Plc