The Role of SMEs in Nigeria Economic DevelopmentAbbakin
This article is looking at the role of SMEs in Nigeria economic development. Or if you like, a review on how the small and medium scale enterprises have contributed to the economic growth in Nigeria, and other African countries.
Micro, Small and Medium sized businesses can boost the economy of Nigeria in areas such as employment create, poverty reduction, and industrial development among others.
It is often said by reformers that ‘government should be conducted upon business principles’. This is because the government offers a wealth of data and information about businesses, industries and national economic situations.
However, “the principles of business have not changed…only the environment of business has” changed over the years.
Small and Medium sized Enterprises (SMEs) occupy an important position in the economic development of any country, for example is the case of Nigeria’s commodity market.
SMEs hold immense potential for generating employment opportunities, development of indigenous technology, diversification of the economy and forward-integration with established sectors such as banking, telecommunication, oil and gas among others.
By definition, Micro, Small and Medium sized Businesses, (MSMEs) are seen as the entrepreneurship businesses with small number of employees, small investment capitals, and small annual business turn-over.
Nevertheless, there are great economic importance this sector can contribute to the national building. We will follow statistical figures showing the importance of SMEs in Nigeria economic growth.
First, lets look at some well meaning economies of the world which are growing due to the government investment in entrepreneurship.
The Role of SMEs in America Economic Development (China vs. USA)
The Small and Medium sized Enterprises are the backbone of successful economies like the USA, EU and the People Republic of China; where over 43 million small businesses employ more than 50% of the workforce, and generate more than half of the nations’ gross domestic products (GDP).
With over 29 million small businesses in America, 23 million are self employed; therefore the US economy relies on small businesses.
According to a report by Liberty Capital Group, “around half of the American workforce is employed by a small business, and almost 67% of all new jobs are generated by small businesses”.
Sadly, when it comes to accessing the capital a business needs, many small business owners struggle, turning to banks and government only to be denied or written off in favor of bigger corporate ventures.
The Role of SMEs in Nigeria Economic Development
A survey carried out by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in conjunction with National Bureau of Statistics (NBS) in 2013 reveled;
The total number of MSMEs in the country as at 2013 stood at 37,067,416.
With Micro Businesses recording 36,994,578, Small Businesses recording 68,168, and Medium Businesses recording 4,670.
The total number of persons employed by the sector as at December, 2013 stood at 59,741,211, representing 84.02% of the Nigeria total labour force.
While the Micro, Small and Medium Scale Enterprises contribution to the nation’s Gross Domestic Product (GDP) in nominal terms stood at 48.47%;
MSMEs’ contribution to exportation also accounted for 7.27%.
Therefore, there are over 37 million micro, small and medium enterprises in Nigeria that have employees.
If each firm hired one more employee, we would be out of our current predicament.
This expectation is certainly not misplaced, but would have been more justifiable if an enabling environment can be provided for each of these MSMEs.
You can imagine that over 37 million new jobs will be created by the entire MSMEs in Nigeria by simply creating one extra employment opportunity.
However, the development of a viable and efficient MSMEs sub-sector in Nigeria like other evolving nations is hampered by structural constraints over the years.
These constraints include difficulties in marketing and distribution of products, communication problems, lack of investment capitals, and lack of power supply to mention but a few.
Talking about the economic factors affecting businesses in Nigeria, most of these limiting factors are well covered in our future topic below.
Wrapping up: The Role of SMEs in Nigeria Economic Development
There is no doubt that small and medium scale enterprises are essential for rapid and sustained economic growth and development of any nation.
The micro, small and medium scale business in Nigerian can be the bedrock to the Economy.As most economists assert today:
“We will never generate a stable economic recovery from the depths of the “Great Recession” without an energetic response from both small and medium-sized businesses (SMEs)”.
The Nigerian graduates, busy working professional and retirees can no longer rely on salaries, pensions and post service years of unknown future jobs.
There is an urgent need for investment in entrepreneurship and small businesses across all major sectors like Agriculture, Information Technology, Manufacturing, Arts/Fashion, Entertainment, etc.; with the prime mandate to breaking the poverty and unemployment cycle in Nigeria and boost the economy.
Many government agencies and institutions have played and continue to play significant roles in the growth and improvement of SMEs sub-sector in Nigeria, but more efforts are required if we are to achieve success.
SMEs will create employment opportunities for the teaming Nigerian population, enhance capacity building for manpower and skills development, promote economic growth, reduce the current poverty level as reported by the Word Bank Group, and facilitate industrial development.
These are the roles of entrepreneurship in economic development. And we urge you to be a part to this empowerment program.
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