7 issues to shape SMEs in 2017


January 9, 2017 | 8:36 am
  |     |     |   Start Conversation

The year 2016 was challenging for Nigerian micro, small and medium enterprises (MSMEs), according to key stakeholders.

The sector faced numerous challenges, ranging from foreign exchange scarcity to power outages. These challenges led to the closure of 222 small businesses, shedding 180,000 jobs, according to a report released in August 2016 by NOI Polls Limited in association with the Centre for the Studies of Economies of Africa.

This year, small business analysts and players have outlined seven major issues that will define the performance of MSMEs.

The first major issue that will make or mar MSMEs, according to stakeholders, is the take-off or otherwise of the Development Bank of Nigeria (DBN).

The Federal Government reached an agreement with the World Bank Group and other development partners in October 2016 for the release of $1.3 billion for the take-off of DBN this month, said Kemi Adeosun, finance minister.

The focus of DBN is to provide cheap funds for cash-strapped Nigerian SMEs to enable them unleash their full potential.

Given the credit challenge facing small businesses in the country, key stakeholders see the take-off of this bank as one big win for both government and MSMEs in 2017.

“One of the key issues that would shape MSMEs) is the new Development Bank of Nigeria that will begin operation soon. The development bank will address issues around funding and collateral for small businesses,” Friday Opara, director for strategic partnership at Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), told BusinessDay in a telephone interview.

The second major factor that will determine the performance of MSMEs this year, according to stakeholders, is the disbursement of the Central Bank of Nigeria’s N220 Billion MSME Fund domiciled in banks.

Many SMEs cannot access this fund and those that can, do so at over 21-22 percent, despite CBN’s insistence that banks should lend this fund at nine percent, said Jon Kachikwu, chairman, SME Group of the Lagos Chamber of Commerce and Industry (LCCI).

According to Tony Ujabi, an SME expert, if the CBN succeeds in convincing commercial banks managing this fund to lend more to SMEs at a much lower rate, small business owners will provide more jobs and quicken Nigeria’s economic recovery.

Third on the list is the stability or otherwise of the foreign exchange market. Many MSMEs are either importers of finished products or inputs. A number of them have foreign partnerships, while some are exporters and will need to take their dollars from domiciliary accounts at the going market rate. A continuation of instability in the FX market will limit the progress of MSMEs, while a change of the current policy could spur small businesses, say analysts.

According to Friday Opara, the country needs a stable exchange rate policy to guarantee certainty in the business environment.

Opara said the fourth key issue to shape SMEs this year is technology.

“Technology and innovation will shape MSMEs in 2017. For small businesses to be competitive, there must be innovation. The world is changing very fast as a result of technology,” said Opara.

The fifth point mentioned by stakeholders is taxation. The current economic crunch is pushing governments at the federal, state and local levels into aggressive hunt for taxes. 

A 2016 report by Pricewaterhousecoopers(PwC) shows that the official list of approved taxes collected by the three levels of government have risen from 39 to 61 in this administration. Some of the taxes are multiple in nature, say small business owners.

“Taxation will play a big role in shaping SMEs this year. The government is looking at ways to generate income for its expenditure, and taxation is the top on their list. This is going to affect the operations of small businesses because taxation constitutes part of our production cost,” said Abdul Rasheed Yerima, assistant director, Nigerian Association of Small and Medium Enterprises (NASME).

The state of infrastructure, especially power, is also a make-or-mar issue.  If the power minister Babatunde Fashola as well as generation, transmission and distribution companies get this sector right this year, small businesses will enjoy low running or production costs.

Femi Egbesola, president, Association of Small Business Owners of Nigeria (ASCON), said: “Infrastructure is an issue that would shape the activities of MSMEs in 2017. Power is a major challenge that has crippled a lot of businesses. The government must reform the power sector to improve supply for Nigerians.”

Ike Ibeabuchi, CEO of MD Services Limited, said the success or failure of the 2017 budget implementation will impact MSMEs.

“If the Export Expansion Grant is released; if the roads projects are executed; if the N15 billion for the recapitalisation of Bank of Industry and Bank of Agriculture is released, MSMEs will see opportunities for expansion. Otherwise it will be the same old story,” Ibeabuchi said.


January 9, 2017 | 8:36 am
  |     |     |   Start Conversation

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