The Federal Government declared that it is working with stakeholders to improve MSME participation in the economy through improving the business climate which will create jobs.

This was disclosed by Amb. Mariam Katagum, Minister of State for Industry, Trade and Investment, at the 7th EMPRETEC Global Summit,  on Tuesday, themed “The Role of Entrepreneurship, MSME and EMPRETEC in post-COVID-19 Resurgence.”

The Minister stated that the MSME sector of the economy is the growth engine of any economy which contributes to its development, job creation and export, amongst others.

“An MSMEs survey indicates that Nigeria’s SMEs contribute nearly 50 percent of the country’s GDP and account for over 80 percent of employment. No doubt, the sector is pivotal to Nigeria’s growth, including reducing poverty and unemployment levels.

It has, therefore, become more apparent that supporting entrepreneurs and small businesses by creating opportunities for MSMEs to thrive is essential for increasing productivity, creating jobs, and boosting our economy.

This is why the Government is working with stakeholders across all sectors, to create the enabling environment for entrepreneurs and MSMEs to ensure that they grow now and into the future,” she stated.

On economic sustainability

The Minister said that the FG has schemes aimed at improving the post-pandemic climate for SMEs in Nigeria. She also disclosed that the FG launched the National Policy on Micro, Small and Medium Enterprises (MSMEs), a framework for the resolution of the challenges faced by the sector.

The programmes launched by the FG includes the Survival Fund and Guaranteed Off-take Schemes, operated by a Steering Committee in the Ministry of Industry, Trade and Investment.

“The Government of Nigeria had, prior to the outbreak of COVID-19, initiated the MSMEs Clinics scheme as a strategy, aimed at providing support for the MSMEs in the country.

At the clinics, operators in the MSMEs space are engaged by regulators and business advisory experts, on issues ranging from entrepreneurship, skill development, finance, quality & standards, and on how to facilitate and grow their businesses and enterprises,” she added.

What you should know 

Nigeria’s unemployment rate as of the end of 2020 rose to 33.3% from 27.1% recorded as of Q2 2020, indicating that about 23,187,389 (23.2 million) Nigerians remain unemployed.

A combination of both the unemployment and underemployment rate for the reference period gave a figure of 56.1%. This means that 33.3% of the labour force in Nigeria or 23,187,389 persons either did nothing or worked for less than 20 hours a week, making them unemployed by our definition in Nigeria.

The significance of SMEs for any country, especially Nigeria, cannot be overemphasized. It is, therefore, not surprising that SMEs constitute one of the bedrocks of economic development in the country. This makes it a sector that should be given utmost priority by the government.

To get started, the government needs to make funding more accessible to small and medium enterprises at low interest rate. Reason being that they need capital to thrive and nurture their businesses. Despite the global consensus that SMEs are crucial to economic development, access to funds remains a militating factor against the growth of SMEs in both developed and developing nations of the world.

READ: Unemployement & Inflation: MSMEs as a path to recovery

The federal government of Nigeria with the support of the World Bank and the African Development Bank have tried in the past to assist SMEs through various credit schemes and loans structured to fund Small and Medium Enterprises, some of which are World Bank SME loan scheme, African Development Bank Export Stimulation Loan scheme; CBN Rediscounting and Re-financing Facility, National Economic Reconstruction Fund, Bank of Industry and the Graduate Employment Loan Scheme initiated by the National Directorate of Employment.  Moreso, there are other ways that SMEs can be funded which are through Bootstrapping, loans from banks, moneylenders and grants from government institutions and non-governmental institutions.

Source: Nigerian Institute for Social & Economic Research

According to NISER findings, about 73% of SMEs raised their funds through Boostrapping (personal savings), about 2% obtained their funds from financial institutions, while 0.21% obtained their funds from other sources.

Here are some ways that SMEs are can access funds in Nigeria.

READ: Afreximbank sets up a $500 million fund to support Africa’s creative industries

Accessing loans from banks

Banks (Commercial, Merchant & Development banks) offer credits to Small & Medium Enterprise in Nigeria. Before giving you a loan, they need to ascertain that you are creditworthy, and your business would have gotten to a particular stage. Also, you need to know that before applying for a loan, your small-scale business must conform with the goals and interest of the financial institution you want to apply to. Other things banks put into consideration before disbursing a loan are a well-written business plan, a financial record, collateral, and a guarantor. Nevertheless, many financial institutions are sceptical about giving SMEs loans because of the associated risks. Some prefer to pay the fine imposed for not meeting the target of giving SMEs loans than run the risk of being exposed to them.

Funding from Small and Medium Industries Equity Investment Scheme (SMIEIS)

Another source of funding for SMEs in Nigeria is the Small and Medium Industries Equity Investment Scheme (SMIEIS) Fund. This type of funding is designed to finance SMEs through venture capital. This initiative is from the government and its aim is to advance SMEs to drive industrialisation, poverty mitigation, sustainable economic development, and creation of employment. Venture Capital financing provides funds as a loan to SMEs with the idea of converting the debt capital into equity in future. Venture capital may be regarded as an equity investment where investors expect significant capital gains in return for accepting the risk that they may lose all their equity. To be eligible for equity funding under the scheme, a prospective beneficiary shall have the following:

• Be registered as a limited liability company with the Corporate Affairs Commission and comply with all relevant regulations of the Companies and Allied Matters Act (2020) such as filing of annual returns, including audited financial statements.
• Be in compliance with all applicable tax laws and regulations and render regular returns to the appropriate authorities.

Grants from non-governmental organisations/foundations

Business grants are another source of funding and they are mostly given by NGOs and foundations. These grants can be accessed by individuals, firms/company, business, or corporations to develop their businesses or scale up operations. One of the best ways to get finance for business or ideas is getting a grant. While a loan is a good alternative, a grant is far better than a loan. It gives you the peace of mind to build and grow your business or idea. It is like getting “free money.” There are many organizations that offer grants in Nigeria, Africa and worldwide. Some of these organizations are the Tony Elumelu Foundation, Bank of Industry, YouWIN, AYEEN financial grant, etc.

Bootstrapping

This is a situation where business owners resort to funding their businesses with their savings and revenue without the support of venture capitalists or bank loans. Apart from personal savings, financial support for businesses, especially at the startup stage, can also be sourced from relatives and friends.

Getting loans from microfinance schemes/moneylenders

Due to the rigorous processes and high interest rates demanded by commercial banks, Microfinance banks were established to assist small businesses in securing loans. SMEs are eligible for Microfinance loans if they meet the requirements stipulated by the bank.

In conclusion, SMEs constitute the driving force of industrial growth and development in the country. The government should focus on and nurture the sector by making funds at low-interest rates more accessible to players in it to help them thrive.