SMEs and Nigerian cities
In the coming decades cities will transform Nigeria. But to benefit from their growth potentials businesses and government (state and local) have work to do.
Officials must know their cities. Lagos, Abuja, Port Harcourt, Ibadan, Oshogbo, Kaduna, Lafia, Akwa, Aba, Owerri, Calabar have been identified for their middle class, high population density and proximity to already thriving commercial cities e.g. Nassarawa and Kaduna are close to Abuja.
“Nigeria Unveiled”, a report by Renaissance Capital, an investment bank, notes the strengths, weaknesses and opportunities of Nigeria’s 36 states. The report identifies Lagos as the heart of Nigeria’s economy; expansion opportunities for retailers; the location of Nigeria’s educated; manufacturing opportunities in the north etc.
For instance, the states that spend the most on transport are those with the biggest cities and ports, and the highest levels of airport passenger traffic. The airports in the three states that spend the most on transport – Lagos (48 percent), Abuja (28 percent) and Rivers (8 percent) – account for 82 percent of the country’s total airport passenger traffic.
Rent, Nigeria’s biggest non-food expenditure, consumes a little over 30 percent of household expenditures. Rental income is highest in Lagos, thanks to population density: 3,200 people per km. Though most Nigerians live in rented houses a recurring aspiration is to own their property, to live in or lease. Clothing and footwear is the second largest non-food expenditure; Kano, Lagos and Rivers are the top three spenders.
Airport traffic grew in Lagos, Kano, Ibadan and Abuja, Nigeria’s most populated cities respectively, between 2001 and 2011 (except Ibadan). Lagos accounts for over half of airport traffic and with Abuja, accounts for 90 percent of revenues.
SMEs, with improved access to finance and business support services, can generate growth in these cities. The Federal Capital, Lagos, Kano, Oyo and Rivers States account for 39 percent of micro small and medium enterprises in Nigeria, based on a survey by National Bureau of Statistics and SMEDAN.
Manufacturing and wholesale and retail – repair of motor vehicles and household goods – businesses, employ the most number of people: 6,652 and 4,041 respectively. Thousands are also engaged in health and social work, financial intermediation, hotels and restaurants, and education.
However, several “unfavourable government polices”, hurt most small to medium scale entrepreneurs in Nigeria. Many are pre-occupied with three things: taxes, power supply and infrastructure/social amenities.
Their “top priorities” include finance, infrastructure, regular power and water supply, adequate transport, farm inputs, provision of financial institutions, equipment and spares/raw materials, security and the reduction of taxes.
Business continuity in Nigeria is precarious: 13,169 small to medium enterprises in Nigeria are sole proprietorships. Limited liabilities, partnerships and faith based organisations can take the slack, if laws and courts, to adjudicate and arbitrate, are made to function. Long term, relation-based businesses need trust to thrive.
Property rights to say, land and inventions, can serve as collateral. Or else start-up capital hovers around N10 million for most SMEs; hindering expansion. One-quarter of the entrepreneurs surveyed by NBS channel their products to a single locality; other enterprises are spread across the same town, state or Nigeria. Few dare to expand into West Africa or beyond.
Slow implementation of crucial reforms is not helping. We thus exhort the legislative and executive arms of state governments’, working in tandem with business associations and relevant ministries and agencies, to pass bills and work out policies that favour small businesses. The promotion of skill acquisition, improved security, and trade-linked strategic infrastructure development e.g. roads that connect farms and factories to the cities are some measures that can turn Nigerian cities into hubs that will boost the engines of growth: SMEs.