government_s drive towards smes development in nigeria

7/29/2019 Government_s Drive Towards Smes Development in Nigeria

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GOVERNMENTS DRIVE

TOWARDS SMEsDEVELOPMENT IN

NIGERIAA Paper Delivered By

OLUSEGUN AGANGAHONOURABLE MINISTER OF TRADE AND INVESTMENT

AT THEUK-NIGERIA SME NETWORKING EVENT

7TH MARCH, 2013
http://www.google.com.ng/imgres?imgurl=http://www.officialpsds.com/images/thumbs/Nigeria-Coat-Of-Arms-psd19573.png&imgrefurl=http://www.officialpsds.com/Nigeria-Coat-Of-Arms-PSD19573.html&h=340&w=400&sz=171&tbnid=W5LhRJ9H23L_4M:&tbnh=105&tbnw=124&prev=/images?q=nigeria+coat+of+arms&hl=en&usg=__zXLXO7o8Utl8tmnB4REkQ_I8ofM=&ei=I4XZS4GeJp6UOLasyQM&sa=X&oi=image_result&resnum=1&ct=image&ved=0CAYQ9QEwAA


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Welcome to NIGERIAFig. 1 MAP OF NIGERIA Showing Major Towns and

Neighbouring Countries

Prepared By SMEDAN 2


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NIGERIA-GENERAL OVERVIEWIt is Africas most populous country with a totalland area of 923,678Km2.

Growth rate of 2.45%.Nigeria, a multi-ethnic country of about 170million people, is located on the west coast ofAfrica.Nigeria operates a democratic, decentralized,

federal system of government comprising afederal capital territory (FCT), 36 States and774 LGAs.There are six geo-political zones.The Federal Capital and seat of government isAbuja.There are three dominant ethnic groups: theHausa-Fulani, the Yoruba and the Ibos.However, about 250 ethnic nationalities co-existwith them.Huge untapped investment opportunities in the

SME Sector and a mixed economy framework.


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PREPARED BY SMEDAN 4

INTRODUCTIONThe Micro, Small and Medium Enterprises (MSMEs)have been known, all over the world, to be engines ofeconomic growth and contributors to employmentgeneration, wealth creation, poverty alleviation andfood security.Recent data provided by the National MSMEscollaborative survey 2010, put the number of Micro,

Small and Medium Enterprises (MSMEs) in Nigeriaat 17,284,671 with total employment put at32,414,884.Deliberate efforts must be put in place to growthese numbers if we must achieve our national visionof being among the 20 most industrialised nations bythe year 2020.Hence SME contemporary development challengesmust be critically addressed in a structured andefficient manner in order to achieve our nationalgoal of job creation in tandem with the

Transformation Agenda.


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MSMEs DEFINED

NB: Where there is an inconsistency betweenemployment and asset base, employmentcriterion will prevail.

CATEGORY EMPLOYEES ASSETS (NM)(excluding landand buildings)

MICRO Less than 10 Less than 5SMALL 10-49 5-less than 50

MEDIUM 50-199 50-less than500


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SMEs AND THEIR RELEVANCE

PREPARED BY SMEDAN

SMEs

EmploymentGeneration

Ensuring soundcompetition

Mobilizationof localresources

Mitigation of rural-urban migration

Wealth creation,income generationand povertyalleviation

Enabling adaptivetechnology andskill acquisition

Creation ofnew industries

6

Platform forIndustrialization


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CURRENT STATE OF MSMEs IN NIGERIA

7


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8

SME CONTRIBUTION TO GDP ANDEMPLOYMENT GLOBALLY

SMEs in high income countries contribute55% to GDP and over 65% of totalemployment .

In middle income countries SMEs and informalenterprises account for over 70% of GDP andover 95% of total employment

In low income countries SMEs and informalenterprises account for over 60% of GDP andover 70% of total employment


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DETAILS ON THE NIGERIAN MSME SURVEY

The survey was conducted in all 36 states of the Federation

including the Federal Capital Territory, Abuja

Divided into household, agriculture and business components.

Over 300 micro enterprise households per state were visited while4000 small and medium enterprises cutting across 12 sectors of

the economy were covered.

Enterprise Group Company Size

(Employees)

Survey

Micro 1-9 National Integrated Survey

of Households (NISH)Small 10-49 National Integrated Survey

of Enterprise (NISE)

Medium 50-199 National Integrated Surveyof Enterprise (NISE)


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MSMEs Contributions to the Nigerian Economy

Q4 2012 Nigeria GDP grew by 6.17% surpassing the

forecasted 5.34% MSMEs account for 46% of Nigerias GDP (2010)

46%

MSME Other contributions


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MSMEs Contributions to GDP by sector

For example MSMEs contributes 99.13% of real estate,

renting and related business activities to GDP while 98.01%

of GDP is contributed by the Agricultural sector.


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Breakdown of SME Headline figures

Total estimated to be 17,284,671 MSMEs in Nigeria.

Of the total number micro enterprises account for the majority(99.87%) of the MSMEs in Nigeria with 17.26 million enterprises

Lagos state has the highest number of small and medium

enterprises (4,535) while Osun state has the least (100). Lagos state has the highest number of micro enterprises

(880,805), followed by Kano state (872,552), while FCT recordedthe least (272,579).

The total number of persons employed by the MSME sector as at

December, 2010 stood at 32,414,884.

The female entrepreneurs accounted for 42.1% in the ownershipstructure of microenterprises as against 13.57% in small andmedium enterprises.


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MSME Contribution to the economy (Exportearnings)

SME Development holds great potential for Nigerianexport and Balance of Trade improvements

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00

UK

USA

India

Hong Kong

Japan

Nigeria

Export Earnings (%)

UK

USA

India

Hong Kong

Japan

Nigeria

13


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Low Access to Finance from Commercial Banks

Despite Increased Government Support to SMEs,Commercial banks have reduced their support for SMEsover time.

48.79%

32.18%

22.19%

22.94%

25.00%

16.96%15.49%13.26%

8.76%6.59%

8.63% 7.45%3.62% 2.67%

1.02% 0.85% 0.17% 0.18% 0.16%0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Commercial Banks Loans to small scale enterprisesas a percentage of Total Credit

Commercial Banks Loans to small scale enterprises as a percentage of Total Credit

14Source: CBN


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PREPARED BY SMEDAN

CONTEMPORARY DEVELOPMENTCHALLENGES OF THE SMEs SECTOR

Poor access to affordable finance

leading to inadequate working capital.Lack of work space.Poor access to both local, regional &international markets leading to poorbusiness turnover.Obsolete technology leading to inabilityto compete globally.Inadequate government support andencouragement.Weak infrastructure leading to highcost of doing business

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PREPARED BY SMEDAN

CONTEMPORARY CHALLENGES CONTDAbsence of patent right and unprotectedintellectual property rights.Low capacity utilization.Non insurance of business risk.Non effective implementation of theNational Policy on MSMEs.

Poor management of business operation dueto lack of business management skills.Administrative barriers in doing business,Multiple permits and fees are required at

the state and municipal level, oftenspontaneously.Absence of a general rating schemeNon availability of qualified artisans (skillgap)

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GOVERNMENT PAST EFFORTS ATADDRESSING THE CHALLENGES

The establishment of Industrial DevelopmentCentres (IDCs) in the 1960s.The establishment of the National Directorate ofEmployment (NDE) in 1989.The establishment of the Bank of Industry (BOI)in 2001 from the defunct Nigerian IndustrialDevelopment Bank (NIDB) and the Nigeria Bankfor Commerce and Industry (NBCI).The establishment of the Small and MediumEnterprises Development Agency of Nigeria(SMEDAN) via SMEDAN ACT 2003.

The launching of the Micro Finance Policy,Regulatory and Supervisory Framework for Nigeriain 2005 which resulted in the establishment ofMicrofinance Banks.



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The N200 Billion intervention fund for re-financing and restructuring of Banks loans to themanufacturing sector.The establishment of the N200 Billion Small andMedium Enterprise Credit Guarantee Scheme(SMECGS) in 2010 by the Central Bank of Nigeria.

The Agricultural Credit Guarantee Scheme Fund(ACGSF) launched in 1977.The Nigerian Incentive Based Risk Sharing System(NIRSAL) for agricultural lending launched in2011.

The National Economic Reconstruction Fund(NERFUND) was set up in 1989 to catalyze theSME sectors growth through medium & long-termfunding.



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The N100 Billion bond-funded Cotton, Textiles andGarment Industry Revival Scheme.The Bank of Agriculture (BOA) has emerged fromthe Nigerian Agricultural, Cooperative and RuralDevelopment Bank (NACRDB ).Facilitating and guaranteeing external financethrough the World Bank, African DevelopmentBank (AfDB), International Finance Corporation(IFC) and other international institutions willingand capable of assisting MSMEs.Marching funds from big Entrepreneurs by BOI

such as the N5 billion by Aliko Dangote.Marching funds from States by BOI.Youth Enterprise With Innovation In Nigeria(YOUWIN)



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WAY FORWARDRenewed commitment by all tiers of government to drive

the overall development of the MSMEs sub-sector inNigeria.

Establish the National Credit Guarantee Scheme forMSMEs to create an effective access to affordablefinance for MSMEs.

Establish a comprehensive National MSME RatingInformation and Database.

Pump more funds into infrastructure developmentthrough PPP and ensure value for money.

Effective implementation of the National Policy onMSMEs.

Deliberate incentives should be put in place for thedevelopment of SMEs as is done in other jurisdictions.Eg,. Equipment incentive, Technology incentive, Marketing

incentive and National Awards for MSMEs incentive.Prepared By SMEDAN 20


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WAY FORWARDDevelop an integrated Industrial Development

Centres (IDCs) with effective BDS.Establish the National Council on SMEs.

Promote and develop the Venture Capital sectorand other forms of making funds available at

affordable rates including listing on the stockexchange.

Undertake transformational projects that willtake MSME development to specific sectors and

rural areas e.g. OLOP for artisanal miners, S-VAP,etc.

Remove barriers to access to finance, effectiveBDS and increased productivity.

Prepared By SMEDAN 21


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CONCLUSIONThe SME Sector provides the platform foropening the country to global competitiveness

and prosperity required to elevate Nigeria toan economically advanced nation.

MSMEs need all the support from allstakeholders in order to operate optimally and

sustainably in this era of open markets,competition and global economic & financialcrisis.

FMTI will continue to support the

development of SMEs in Nigeria forsustainable economic growth and development.


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government_s drive towards smes development in nigeria

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