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MSME

These easy to overlook challenges are killing SMEs in Nigeria

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Challenges Killing SMEs

Whenever you come across one of those reports indicating that SMEs are the fundamental forces driving economic growth across the world, you better believe it because it’s true. According to PwC Nigeria, the SME sector is the backbone of major developed economies just as much as it plays a pivotal role in enabling employment and trade. In Nigeria, the sector is responsible for 84% of employment, accounts for 96% of businesses, and contributes 48% of the national GDP. 

Unfortunately, the small businesses that comprise this important sector are being threatened by some challenges which are often disregarded. To shed light on these problems, Nairametrics investigated. Below is the report, alongside some possible solutions. 

A Visit to the Markets 

The semi-industrial Lagos neighbourhood of Ogba is popular for many things, including its markets —the Ogba Market, the Sunday Market, and the newly-reconstructed Ogba Multipurpose Shopping Complex. It was around here that I met Taiwo that sunny Saturday afternoon. As a trader, he specialises in selling all kinds of men’s clothes and accessories. 

In case you haven’t figured it out already, I was not here on a fashion mission. But in order to get my mission accomplished, I had to pretend to be a customer. Having done this before, I knew that the key to getting traders to talk freely is simple — patronise them. That was exactly what I did. And after successfully negotiating a backpack which was nicely displayed in front of his shop, I asked Taiwo to talk to me about the challenges he faces as a small business owner.  

[READ: Financial Risk Management Tips for Individuals and SMEs]

As expected, the man had a list of problems to share off the back of his head; the lack of funding being chief among them. Now, it is already common knowledge that the lack of easy access to finance is the biggest challenge small business owners have to grapple with. But I wanted to learn about the often-overlooked problems that are also forcing small businesses to shut down. So, I rephrased my question, and soon Taiwo was telling me everything. 

Typical small business setup in Lagos, Nigeria.

High Cost of Rent, Poor Accommodation 

Taiwo highlighted a long list of challenges he tries to handle as a small business owner. Out of all of them, the one that stood out is the high cost of his rent. For the relatively small space he occupies, the man pays as much as N150, 000 in annual rents. And while this may not seem like much for some people, for the father of two who is also the breadwinner of his family, it is quite a lot…

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Other traders have had more difficult challenges when it comes to the issue of accommodation. Somewhere around Ikeja Underbridge, some five kilometres away from Ogba, I met Sam who sells used clothes. Unlike Taiwo, Sam cannot even afford a proper shop. To survive, he displays his wares by the roadside, but within a limited space which can barely accommodate his table. For this small space, the young man must pay the sum of N40, 000 per annum or risk being “kicked out”. Here, roadside traders pay rents to the owners of the buildings in front of which wares displayed. 

Sam's roadside shop in Ikeja Underbridge

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The Rain and Sun Are Problems 

For roadside traders like Sam, securing a roadside space is one thing while coping with the challenges that come with owning the space is another thing. A shoe seller, who refused to be named, lamented how his goods are often damaged by both the rain and the sun just because he cannot afford a proper shop. The man, who has a small space right next to Sam’s, said the following; 

“When the rain is not falling on the shoes, the sun is beating it and damaging its quality. At the end of the day, customers will refuse to buy. And when they don’t buy, what is the essence of paying for this space in the first place?” 

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[READ: 10 Mistakes to avoid for Start-Ups]

KAI Officials Pose a Challenge 

Many traders who can neither rent a shop nor a small roadside space, have often resorted to turning the railway in Ikeja New Garage into a makeshift marketplace. Here, you will see all kinds of traders struggling to make ends meet. They too must deal with the challenges posed by the rainfall and the scorching sun. Most of all, they also have to deal with KAI Officials.

Market place

In their determination to Kick Against Indiscipline in Lagos State, the KAI officers are known to attack unexpectedly, arresting and confiscating the wares of the traders illegally trading on the railway. If arrested, one could allegedly spend months in jail unless they pay bribes.  

Other “peculiar” Challenges… 

Madam Gold, as she is popularly called, sells male underwear somewhere along Kudirat Abiola Way. She too cannot afford to pay for a proper shop. However, not having a store of her own comes with a special kind of challenge asides the sun and the rains. 

“Some customers believe that those of us who sell in open spaces like this are selling cheap materials. For that, they price our goods ludicrously” she said. “There is no difference between what we sell here and what they sell inside some of these boutiques around. The only difference is that you enter there and some of them have fans and ACs. So, they add up the cost of the AC and people like you willingly pay. But when you come here, you try to buy the same quality at reduced rates…” 

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Any trader caught by a KAI Officer would be detained in this van alongside his/her wares.

Multiple Taxation for medium-scale enterprises 

Medium-scale businesses may not exactly be facing the same kind of challenges smaller ones face, but they have their problems quite alright. These range from multiple taxation from the government, to the challenge of finding quality staff. 

In conclusion, there are just some of the challenges facing small and medium scale enterprises in Nigeria. There is the need to proffer solution to these challenges, bearing in mind the importance of SMEs in every economy. Nairametrics is, therefore, using this medium to call on the Government, grant agencies, and NGOs to come up with more schemes that could help ameliorate the problems highlighted above. 

Market place

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Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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Business News

TLG Capital and Fidelity Bank to invest $20 million on Nigerian SMEs

TLG Capital announced that it would be investing with Fidelity Bank Plc amount to the tune of $20 million on SMEs in Nigeria

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Entrepreneur, Multiple businesses, Nigeria partners UAE to boost SMEs , US technology company deploys software to ease business process in Nigeria, Experts outline what SMEs must do to attract funding, investors in 2020 , Simple ways to prioritize customer service for your small business, What was SMEs must do to survive the coronavirus outbreak , What was SMEs must do to survive the coronavirus outbreak, FG rolls out N2.3 trillion survival funds for MSMEs; see criteria 

Private Equity firm, TLG Capital has announced that it would be investing together with Fidelity Bank Plc, an amount to the tune of $20 million on SMEs in Nigeria.

The funds will be channelled through TLG’s Africa Growth Impact Fund (ADIF), towards the development of SMEs in the country. Notably, the fund will be directed to SMEs that are focused on healthcare, education, consumer sectors, amongst others.

This new investment is in line with the bank’s move to provide innovative funding options and other forms of relevant support to entrepreneurs in the country.

READ: Investors react to Fidelity’s bond listing, as it gains N1.74 billion

What you need to know

  • Fidelity Bank Plc is a commercial bank in Nigeria with over 5 million customers, serviced across its 250 business offices and other digital banking channels.
  • According to information from the website of TLG Capital, a total of $303 million loans was still outstanding to SMEs and the unbanked through its portfolio companies.

READ: Bank sell-off triggers bearish move in the S&P 500 index 

Why this matters

This new investment will come as good news to SMEs and other entrepreneurs in the country, especially those seeking to obtain loans in the listed sectors.

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Business

FG to set up micro, small and medium enterprises in 774 LGAs

The FG has disclosed plans to establish micro-enterprises in the 774 Local Government Areas (LGA) across the country.

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George Akume

The Federal Government has said that it plans to establish micro-enterprises in the 774 Local Government Areas (LGAs) across the country to help create jobs and ensure improvement in the well-being of the local populace.

This disclosure was made by the Minister of Special Duties and Inter-Governmental Affairs, Dr George Akume, at the Association of Local Governments of Nigeria (ALGON) General Assembly with the Theme: Strategic Positioning for the Future: A New Era, on Wednesday in Abuja.

Akume, who was represented by the Deputy Director, Office of the Minister, Mr Simon Tyungu, said that the establishment of the micro-enterprises was conceived to cushion the effect of the current economic situation.

READ: Why e-commerce platforms are struggling to capture Nigerian population

What the Minister for Special Duties and Inter-Governmental Affairs is saying

Akume said, “As a ministry, we have proposed the establishment of Micro, Small and Medium enterprises in the 774 local governments in Nigeria based on economic corridors. We believe that this will create jobs and ensure improvement in the well-being of the local populace.’

Akume also applauded the role played by ALGON during the COVID-19 pandemic in bringing relief to the people at the grassroots despite their limited resources.

The Minister said, “The administration of President Muhammadu Buhari has taken some bold steps to reposition the local government administration such as granting of local government autonomy and enforcement of democratically-elected local government councils by the states.”

READ: EdTech startup Kabakoo receives funding from Zoom, launches first no-code training in Africa

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“This is a clear demonstration of political will by Mr President. The COVID-19 pandemic that has ravaged the entire country in 2020 was felt more in our local communities. The leadership of ALGON contributed in no small measure, particularly on stimulus packages and advocacy, notwithstanding your financial limitations,’’ he said.

The minister said the Federal Government recognized the fact that people could be reached through the local government area councils and then put some measures in place.

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Going further he said, “The Federal Government in its wisdom then realised that the local government area councils are the veritable vessels through which the dividend of democracy will reach the vulnerable indigent citizens.

“Mr President (of ALGON), I urge you to take advantage of this initiative and key into President Muhammadu Buhari’s resolve to lead 100 million Nigerians out of poverty in the next 10 years. The Federal Government is favourably disposed to attaining this developmental goal.’’

READ: FG earns N28.6 trillion from VAT, others 

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Speaking at the occasion, the ALGON National President, Dr Kolade Alabi, said that ALGON’s general assembly seeks devolution of powers, both financial and administrative, with concomitant fiscal devolution. He said that this is in addition to the request for complete autonomy for local government area councils for effective administration and service delivery to the people noting that such would require the review of the 1999 constitution as relates to local government administration and uniform tenure of the 4-year term for local government administration among others.

What this means

The establishment of such micro-enterprises by the Federal Government will create jobs especially among the unemployed youths and help to boost the economy. This is as the nation tries to recover from the impact of the coronavirus pandemic on the economy, businesses and households.

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