Creating jobs through SMEs

Micro, small and medium enterprises (MSMEs) play an important role in the development of a nation’s economy, creating employment for rural and urban growing labour force, providing desirable sustainability and innovation in the economy as a whole, according to experts. In addition to that, a large number of people rely on the small and medium enterprises (SMEs) directly or indirectly.

The contribution of the MSMEs to the economic growth of a nation is well recognised. In developed economies, they are considered as the ‘silver bullet’ for solving unemployment problems. Same is also thought of their contribution to employment generation in developing countries, including nurturing entrepreneurship.

Because MSMEs have a propensity to employ more labour-intensive production processes than large enterprises, they contribute significantly to the provision of productive employment opportunities, the generation of income and, eventually, the reduction of poverty.

According to the United Nations Industrial Development Organisation (UNIDO), for developing countries, integration into the global economy through economic liberalisation and deregulation, is seen as the paramount way to triumph over poverty and inequality. Important to this process is the development of an animated private sector, in which SMEs can play a central role.

Statistics show that in industrialised countries, MSMEs are major contributors to private sector employment. Empirical studies also found out that SMEs contribute to over 55 percent of gross domestic product (GDP) and over 65 percent of total employment in high income countries. MSMEs and informal enterprises, account for over 60 percent of GDP and over 70 percent of total employment in low-income countries, while they contribute about 70 percent of GDP and 95 percent of total employment in middle-income countries.

A recent data undertaken by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS) put micro, small and medium businesses across Nigeria in the region of 17.3 million with total employment in the sector put at about 32 million, contributing about 45 percent to the GDP.

“We have a market with 167 million people… if only half of the 17.3 million SMEs create a job each every year, that is about 8 million. If a quarter of them create a job each every year, that is about a 4 million jobs,’’ Olusegun Aganga, minister of industry, trade and investment, was quoted as saying in 2012, during the Lagos edition of Market Access Nigeria – an initiative by Enterprise Development Centre (EDC) and Etisalat Nigeria, in collaboration with the Ministry of Trade and Investment and the SMEDAN.

Most of the current larger enterprises in Nigeria and indeed in the world have their origin in SMEs. Little wonder the growing realisation on the part of the government that instead of the promotion of large-scale enterprises, it should ‘incentively’ promote MSMEs.

Until recently, the MSMEs were virtually neglected in the Nigerian Economic Development Strategy. The economic reform being carried out by the present administration has however placed greater emphasis on this sub-sector development, with the government striving to create an enabling and friendly environment in which MSMEs would flourish.

Nigeria’s economic growth has been led by the service sector in the last decade, particularly, in information technology and telecommunications. The agricultural, agro-allied and service sectors offer huge potential for job creation.

Moreover, the importance of MSMEs in the growth process is considered to be a key engine of economic growth and development in Nigeria. Hence, the development and promotion of the sub-sector hold the key to inclusive growth and play a critical role in the nation’s future.

NONSO NDUMANYA