‘SMEs in Nigeria grapple with multiple taxes and expensive infrastructure’

Alhaji Bature Umar Masari, the Director-General of Small and Medium Scale Enterprise Development Agency of Nigeria (SMEDAN) sheds light on the place of SMEs in Nigeria’s economy, their challenges, the emerging role of SMEDAN and government’s vision for the development of SMEs

Give us an overview of SMEDAN and your mandate?

SMEDAN was established in 2003, to facilitate the promotion and development of a structured and efficient, Micro, Small and Medium Enterprises (MSME) sector that will enhance sustainable economic development in Nigeria.

SMEDAN is the apex regulatory body and coordinating institution for all matters relating to starting, resuscitating and growing MSMEs in Nigeria. Presently, we are tasked with implementing the National Enterprise Development Programme (NEDEP) with the overall objective of alleviating poverty, expanding gainful employment opportunities, wealth creation and sustainable economic growth and development.

On the 11th of February 2014, President Goodluck Jonathan launched the National Enterprises Development Programme (NEPED), which aims to create 3.5 million jobs within the first two years of implementation. How far have SMEDAN gone in implementing this mandate?

In terms of numbers, so far SMEDAN, has set up 42,000 cooperatives. Each cooperative has a minimum of 15 (fifteen people). This equates to a minimum of 6300,000 jobs created under this component of NEDEP so far. We took these cooperatives through business training and helped them in setting up their cooperatives.

We have referred these cooperatives to the Bank of Industry and other partner financial institutions for funding of their businesses. The identification and setting up of cooperatives is ongoing, and we will set up 50,000 cooperatives before the end of this year, culminating in a minimum of 750,000 jobs before the end of the year. These cooperatives will also receive business development support from SMEDAN.

SME’s grow at almost twice the rate of the GDP in most market across Asia, Africa and middle East, but the reverse is the case in Nigeria. What are the major issues stifling the growth of this important sector of the Nigerian economy.

You are very right to classify this sector as an important sector in the economy. I like to say that it is the most important sector, because they provide for over 70 % of employment in Nigeria. Based on the collaborative survey we carried out with the National Bureau of statistics in 2010, we found that a number of things stifle SME growth in Nigeria. Chief among this was access to affordable finance.

Then many of them only sell within their towns and locality. We need to change this, if they are to grow. Another key factor is the operating environment. Many SMEs in Nigeria have to grapple with multiple taxes and expensive infrastructure. If a company has to provide its own power, water and sometimes fix the road leading to their factories, then their cost of production and ultimately competitiveness will drop. This is essentially why NEDEP was born. NEDEP is a new way of delivering enterprise development. Previous efforts at SME development only focused on one aspect of the cog, but NEDEP has different pillars that seek to address the issue, of access to affordable finance, access to markets, formalisation of SMEs, proper coordination, reducing the cost of doing business for SMEs and the likes.

For instance, a key component of NEDEP is the formalisation of businesses, we found, during the survey that many SMES in Nigeria are in the micro stage and many never formalise. That is why the President approved the reduction of registering businesses for SMEs by 60 %. This is to encourage them to formalise.

What has SMEDAN being doing to grow MSME’s in Nigeria?

This is a very broad question, but I’d like to tackle it under the pillars we spoke about earlier.

Under the aspect of coordination, we realised that SME development in Nigeria was very fragmented, so we are inaugurating state SME councils in every state of the Federation. These councils will be chaired by the Governor or his designate, and they are meant to tackle issues relating to SME development on a state level.

We have officially launched 10 of such councils and will be doing the same in every state of the Federation within the next six months. On a national level, The President is also going to inaugurate a national SME council to be chaired by the Vice President. This council will consist of all stakeholders in the SME state, where we will tackle all bottlenecks militating against SME development in the country.

This is the first of its kind in the country, and it ensures that issues relating to SME development are brought to the attention of the highest level in the country. One other major thing which we have done is to begin the implementation of the One Local government, One product (OLOP) programme. We have gone to all the 774 local government areas of the country and mapped which product each local government has a comparative advantage in. We found out that many people want to go into business, but they do not know what to engage in, or which products are available in their vicinity. The OLOP programme ensures that everyone knows which products or business they can engage in within their locality. We have mapped the value chain of these products and made it easier for people to engage in and for Financial institutions to fund those engage in these businesses, because we have scoped the risk involved in the whole chain.

Are Nigerians taking advantage of your agency’s support?

Yes, many businesses are taking advantage of our services. In the last survey we found that a number of businesses were not even aware that we existed. So, what we did when I took over was that Honourable Minister Aganga directed that we shift our staff ratio from 80 % at the headquarters in Abuja and 20 % at the states to 80 % at the states and 20 % in Abuja. This way, Nigerians are able to benefit from SMEDAN’s services and I am happy to say that we are now present in 36 states of the federation as opposed to 13 states when I joined initially. I know we can reach more people, and we are taking advantage of technology to scale up our reach. In the coming months, we will be launching an online platform that will enable more people connect with our services through the web.

What is the relationship between SMEDAN, industrial training fund (ITF) & Bank of industry (BOI)?

Incidentally, these three agencies are agencies under the Ministry of Industry, trade and Investment. This is the first time in Nigeria that parastatals are coming together under a programme- In this case, NEDEP. The three agencies are implementing partners if you like, under NEDEP. ITF will focus on training potential business owners in the area of skill acquisition, SMEDAN will train these people in entrepreneurship and form them into cooperatives, then BOI will fund eligible cooperatives under the NEDEP scheme.