National policy on Micro, Small and Medium enterprises
Only recently, the Small and Medium Enterprises Development Agency (SMEDAN) developed the National Policy on Micro, Small and Medium Enterprises. The serialisation of this important policy document began last week. Have a good read
Characteristics and performance of msmes in Nigeria
MSMEs cover the entire range of economic activity sectors in Nigeria. Their problems are many, but they share a number of common problems. These include: low market access, poor access to credit, poor information flow, discriminatory legislation, poor access to land, weak linkage among different segments of the operations in the sector, weak operating capacities in terms of skills, knowledge and attitudes, as well as lack of infrastructure. There are also weak safeguards against occupational health and environmental hazards.However, each of the three size categories of MSMEs has its own special characteristics and problems, and requires policies appropriate to it.
Micro enterprises
An official document published in 2001, a Study of Nigeria's informal Sector put the estimated number of non agricultural micro enterprise at 6.49 million with a total employment of 8.97 million. This group is dominated by wholesale and retail trade which accounts for about 49percent of employment and manufacturing (30percent). Other numerically significant sectors include repair of vehicles (3.2percent), transport (2.9percent), hotels and restaurants (2.6percent) and building & construction (1.8percent). Manufacturing is dominated by food processing (18.7percent), textiles, clothing & leather goods (3.8percent), wood and wood furniture (3.3percent) and metals and metal products (1.1percent).
The typical micro enterprise is operated by a sole proprietor/manager aided mainly by unpaid family workers and the occasional paid employee and apprentice. Output value is very low; a recent survey of informal enterprises put it at an average of N15, 000 per annum. The levels of technology and skills are also very low.
However, with the entry of many unemployed school leavers, including secondary school leavers and graduate of tertiary institutions, there is much scope for upgrading technology and skill level in existing enterprises and for the rise of new high-technology based enterprises.
Funding is mainly from individual resources, with a little help from family and traditional mutual fund societies (esusu). Government interacts very little with individual micro enterprises, except through the occasional cooperative or other officially recognised groups. Bank loans are rarely sought and more rarely obtained. Micro enterprises have two strong points in their favour. They are numerous and ubiquitous. Even a small improvement in their productivity and output will result in large improvements in employment, income and productivity in every nook and corner of the country. But dealing with them requires sensitivity, empathy and a community-focused approach.
Small enterprises
Small-scale enterprises (with employment from 10 - 49 persons) cover much the same spectrum of enterprise types but are concentrated in the more modern, more sophisticated end. While most of them are sole proprietorships, a significant number are incorporated businesses.
This segment has a large reservoir of educated manpower and technical skills, as well as improving access to the banks. It has the highest potential for growth through nurturing, capacity building and support. Organisationally, they are well represented by professional and trade associations.
Medium Enterprises
Medium size enterprises are formal face of Nigerian enterprise. Concentrated in a few sectors, notably manufacturing, transportation, information and communication technology, they are fairly well organised and well connected. They have fairly good access to government and the financial system. Few in number and restricted in scope, they represent the notorious "missing middle" of Nigeria's private enterprise system.
Government and msmes development in Nigeria
The development of MSMEs in Nigeria has a chequered history. Under colonial rule, with the avowed policy of treating the colonial countries as estates to be developed for metropolitan trade, local industries were neglected, and in some instances, actively discouraged in of favour import promotion. Yet, at independence, Nigeria inherited a still vigorous small business sector, with small-scale manufacturing accounting for some 15percent of manufacturing output in 1960.
Adopting a strategy of import substitution industrialisation, the new national governments encouraged large-scale industries by foreign investors and established some themselves.
At regional/state government level efforts were made, through micro-credit schemes to support small business, but the fundamental problems of small scale business were not systematically assessed. By the 1980s the small scale manufacturing sector had shrunk to about 10percent of manufacturing output.
Although the potential of small scale enterprise has long been recognised, it was not until the 1980s, under SAP, that national policy made their promotion a major development priority. Since then several programmes, especially those addressing employment creation, poverty reduction, women empowerment and youth development, have made small scale business a primary strategic focus of their activities.
Specific programmes and measures addressing the needs of small business have tended to concentrate on improving access to credit, although some have incorporated capacity development and other critical measures. The establishment of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is the first major attempt to tackle the problem in a coordinated manner.
Fundamentals of national policy on msmes
Vision and mission
The National Policy envisions MSMEs sub-sector that can deliver maximum benefits of employment generation, wealth creation, poverty reduction and growth to the Nigerian economy. It foresees an MSME sub-sector growing in scope, skills, technology and size, and increasingly able to compete effectively in local, regional and global markets. Its mission is to enhance the contribution of MSMEs to national output, employment and poverty reduction and build the MSME sub-sector as a solid foundation for the competitiveness, growth and sustainability of the Nigerian economy.
Fundamental objectives
Recognising that the success of MSME policy depends on the activities and interactions of the many relevant actors and stakeholders, both public and private, one of the grand objectives of MSME policy is to provide an overall framework of action as a guide for well focused, harmonious and coordinated programming by all actors.
Another grand objective is to set clear goals and targets in the various key areas to ensure policy consistency and provide monitoring and evaluation criteria.
Broad strategy
Taking its bearing from the overarching NEEDS Strategy, the MSME strategy is based on public-private partnership, collaboration and cooperation among stakeholders. Accordingly, it sets out clear roles and responsibilities of stakeholders - government vis-à-vis private sector and civil society. It advocates synergy with other MSME-affecting policies and programmes in other sectors, based on close integration of MSMEs measures within the national sectoral development policies on industrialization, science and technology, education and training. It rallies stakeholders to undertake measures to promote the growth and sustainability of MSMEs.
MSMEs development will focus on supporting enterprises to move up to higher value added links in the value chains, particularly for labour-intensive and low technology-based enterprises. It will also promote outright movement to higher value added chains such as medium and high information and communication technologies.
The development of MSMEs will be underpinned by both social and economic considerations. While some categories of enterprises (e.g. micro) may be emphasised for primarily income generation and livelihood objectives, small and medium enterprises as well as comparative advantage category of enterprises will be targeted for broader objectives of employment generation and international competitiveness.
So, in addition to framework measures, the National Policy emphasizes targeted measures to cater for peculiar circumstances and needs of different MSMEs categories and segments. Targeting will be aligned to the performance experiences and challenges of the different sub-sectors.
The strategy will support well-performing enterprises or sub sectors to realize fully their growth and competitiveness potentials, while also addressing ailing and poor-performing enterprises or sub sectors with remedial measures.
The strategy is designed against the background of the need to inculcate a stronger awareness and orientation towards the appropriateness, adequacy and sustainability of MSME promotional strategies and measures.
Central to the strategy is the consultative and legitimisation process which serves to stimulate dialogue, continuous consultation, regular reviews and shared understanding among policy makers, MSME operators and other stakeholders on the challenges, opportunities and imperatives of MSME development.
3 KEY POLICY AND PROGRAMME AREAS
The overall objective of the National Policy on MSME is to create, nurture and promote the necessary conditions for the growth and development of MSMEs. The policy is based on close partnership and cooperation between the various levels of government and community organisations on one hand and private enterprises and business organisations on the other. It encompasses seven broad policy/programme areas as follows:
1. Institutional, Legal and Regulatory Framework
2. Human Resource Development
3. Technology, Research and Development
4. Extension and Support Services
5. Marketing
6. Infrastructure
7. Finance
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