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| Emefiele |
In a bid to support the efforts of the Federal Government to diversify the economy and create jobs for the teeming youths in the country, stakeholders have continued to clamour for adequate support for Small and Medium Enterprises, SMEs.
According to the experts, it would only be foolhardy for the governments in the country to neglect SMEs at this period of fi scal and other challenges in the economy and expect socioeconomic development necessary to deliver democratic dividends to the people.
It is against the backdrop of providing solutions to the fi scal and the myriad of problems for macro economic stability that analysts are canvassing the prioritisation of SMEs’ issues in policy and other decisions by the tiers of government.
This is especially relevant to the diversifi cation agenda given the strategic roles of the SME sub sector in economic development as they allow for the greater utilisation of raw materials, generation of employment, encouragement of rural development, mobilisation of local savings.
SMEs according to many fi – nancial experts are very important to the growth of any nation. It is therefore not surprising that developed countries growing and booming economy are mainlyattributed to fl ourishing SMEs sector.
According to a lectuer at University of Ghana and a member, The Institute of Chartered Accountants Ghana, Charles Yeboah Frimpong, SMEs contribute over 55 percent of gross domestic product, GDP, and over 65 percent of total employment in high-income countries.
The fi nancial analyst said in the developed economies, small businesses are recognised as the main engines for growth and development because of their signifi cant contributions to economic growth and prosperity.
“The potential of SMEs to promote domestic-led growth in new and existing industries and to strengthen the resilience of the economy in a competitive and challenging environment is inarguable.
“According to the Department of statistics of Malaysia, the economic growth in developed countries such as Korea, Japan, Taiwan and many others, was signifi cantly generated by SME activities. The percentage contribution of SMEs to Gross Domestic Product ,GDP/ total value added ranges from 60 percent in China, 57 percent in Germany, 55.3 percent in Japan and 50 percent in Korea, while i 47.3 percent attained by Malaysia.
He said the SME growth is assessed by its contribution to the three main sectors of the economy; manufacturing, services and agriculture.
The Don said that SMEs have been the backbone of economic growth and driving industrial development.
However in Nigeria SMEs were not given the role it deserves due attention of the governments and even the populace on crude oil which accounts for more than 80 per cent export value and over 90 per cent revenue source of the country.
But currently attention has suddenly been shifted to SMEs due to falling price of crude oil and the desire of the current Federal Government led by President Muhammadu Buhari to diversify the economy to create jobs.
Even the former adminstration of Godluck Jonathan made efforts to reposition the SMEs, but so many challeges could not allow the over 17.3 million small businesses to flourish.
Funding the necessary investment requirement for transformation of SMEs has remained a major obstacle to federal government and the Central Bank of Nigeria, CBN, which led to launching of the N220bn intervention fund for SMEs in 2014.
In order to further lend support to SMEs, CBN, Governor, Mr Godwin Emefi ele said the apex bank would soon unveil a special intervention fund to encourage fresh and young graduates in Small and Medium Enterprises, SMEs.
Speaking recently in Lagos at the opening ceremony of the 7th Annual Bankers’ Committee Retreat, Emefi ele noted that SMEs hold the key for growth and development of the economy, adding that the economies that have withstood the global challenges are those with strong SMEs focus.
He said that the fund which has nothing to do with the N220bn fund for SMEs launched by the CBN in 2014 is targeted at young graduates who would want to be self employ, while providing jobs for others.
According to him banks need to do more in supporting SMEs and “would also assist in disbursing the special fund which through a strategy to be unfolded in the near future.”
Emefi ele said the theme of the Retreat ‘ Creating an enabling environment for SME growth’ is timely in view of signifi cant headwinds the country have been facing in the aftermath of the sharp fall in crude oil prices and sustained slowdown in China’s growth.
“The dominance of crude oil as a major source of our export earnings led to a slowdown in our GDP growth, from an average growth of 6.25 per cent in the second quarter of 2014, to 2.35 per cent in the second quarter of 2015, and a slight rebound to 2.8 per cent in the third quarter of 2015.
“While this challenge has exposed the fragility of our domestic economy, it has also reinforced the view within the bankers committee that steps must be taken by policy makers and fi nancial institutions to support in the growth of SMEs in critical sectors such as agriculture, solid mineral and manufacturing”, he said.
The apex bank’s governor said efforts must be made to address key constraints to the growth of SMEs such as availability of power, adequate transportation, and enabling policies, adding that SMEs are recognised worldwide as a catalyst for rapid growth, job creation, and poverty reduction.
According to him while these funds are small relative to the required sum that is needed to catalyse the growth of SMEs and it can help along with other policy options to reset the metrics under which fi nancial institutions assess the opportunities that could be gained from supporting SMEs.
Lagos State Governor, Mr. Akinwunmi Ambode also disclosed plans by his administration to inject a whooping sum of N25bn into the growth and development SMEs.
The governor, who said that without adequate fi nance would not do much, urged the Bankers’ Committee to maximise the potentials of SMEs as a major catalyst for economic growth.
Ambode said that the growth of SMEs have in the past been stunted by challenges such as infrastructural defi cit and lack of access to capital, urging the banking sector to do much more than they are currently doing to actualise the full potentials of the sub sector and also achieve the goal of diversifi cation.
He said his administration is committed to supporting young entrepreneurs with business ideas to create wealth and generate employment through the establishment fund, which will see the government committing N25bn in the next three years.
The governor urged for a viable platform, which will identify young entrepreneurs for the purpose of supporting and promoting their enterprise, adding that the challenge of any government is to create an enabling environment that will enable the entrepreneurial spirit to thrive.
He said his administration has already taken the bull by the horn by creating an Offi ce of Transformation, Innovation, and Creativity to champion the vision of improving the ease of doing business in the state.
Some of the major problems faced by SMEs in Nigeria include; diffi culty in access to fi nance, high cost of borrowing, unnecessary taxes, lack of support by the government (local, state and federal), inadequate power supply, over dependence of imported goods and poor transport infrastructure among others.
Even though no amount of money rleased by fi nancial institution to SMEs would be enough due to the gap already existing in the sub-sector, banks at end of the Bankers committee retreat recently pledged to increase their support for SMEs.
In the recent time, some banks have developed interest in SMEs, apart from giving the desired funds, banks have also engaged in building capacity of their SME customers. For instance, Sterling Bank this year unveiled its SMEs academy to trains its SMEs customers.
In the same vein, Ecobank recently launched SMEs Club, an initiative aimed at offering preferential business support, products, and services to its customers across the country.
The initiative also serves as a platform for adding value to SMEs, through information garthering, networking, and capacity building.
According to the Managing Director of the bank, Jibril Aku, the empowerment scheme for the SMEs is in line with the lender’s vision “to contribute to the economic development and fi nancial integration of Africa adding that there is no better way to grow Africa and its component countries than empowering the SMEs, which are the engine of growth.
According to experts there the need to pattern our school curriculum to rcognise entrpreneurship at the early stage of the citizens lives.
In Chinese schools, students are encouraged to be entrepreneurial as they are informed from an early age of the rigours of getting a job in the formal sector. This spirit has spurred a people and ultimately their nation to become arguably the largest economy in the world.
Recently in Kenya, a license was granted to a Venture Bank to resume operations in 2016. This is a step in the right direction and a model worthy of emulation by Nigeria. The goal of the Venture Bank will be to support start up’s, young businesses and SMEs by providing affordable funding, expert advice amongst others. many experts have said it is only if and when the government becomes serious about supporting SMEs, that we would expect an increase in output of existing SMEs, a reduction in unemployment and indirectly a reduction in crime, an increase in foreign exchange earnings, a diversifi cation of the economy and Nigeria’s revenue base and a revival of the industrial sector.
But one analysts have said that FG would show commitment is by improving on the infraseructure especially power supply.
The Manufacturers Association of Nigeria, MAN, said rwecently that because of insuffi cient power supply, over 40 per cent of production cost in Nigeria goes to electricity generation by manufacturers.
A member of MAN and Chairman, Technical Committee on Operationalisation of Micro-Grid for Industrial Initiative, Mr Regard Odiah, made the statement in Abuja when he presented the report of the committee to NERC.
The committee was inaugurated by NERC and mandated to take a critical look at the energy laws in the country.
The committee was also required to come up with implementable policies and regulations that would address the numerous power challenges facing industries, especially the manufacturing sector.
“Over 40 per cent of our production cost goes into provision of electricity supply for our manufacturing.
“Also when other infrastructural defi ciencies are added, Nigeria becomes one of the most expensive countries in the world to set up a business venture,’’ he said.
Odiah said the combined power generation capacity of MAN nationwide was 15,000mw while the maximum generation from the central/ national grid was less than 5,000mw and unreliable.
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