Mr Tinubu, majority of 40m MSMEs are on life support

Prior to 2019, Nigeria had 41.5 million micro, small and medium enterprises (MSMEs), but this number has decreased to 39.6 million, according to a survey conducted by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS).

This represents 4.6 percent decrease in the number of MSMEs in Nigeria over the period.

By implication, nearly two million MSMEs shut down between 2019 and 2021, according to the report.

This is a major challlenge that will confront the President-elect, Mr Bola Tinubu, from day one.

The MSMEs contribute more to the Nigerian economy in terms of jobs, exports and contribution to the gross domestic product (GDP), but the government pays more attention to large enterprises. Big companies got tax incentives and waivers valued at N16 trillion in three years, according to Dataphyte‘s earlier report. But banks and the government give little attention to this class of business that accommodates the majority of over 200 million people.

The World Bank says that MSMEs play a major role in most economies, particularly in developing countries. It accounts for economic growth by contributing to the development, job creation, and export as well as reducing levels of poverty and unemployment in the country.  

In 2022, MSMEs contributed 48 percent to Nigeria’s gross domestic product (GDP), accounted for 96 percent of businesses and 84 percent of employment.

The sector is, however, faced with lots of challenges that need to be addressed by the incoming administration of Bola Tinubu.

Power, taxes, funding are major issues

One major challenge facing SMEs is epileptic power supply. Business owners rely majorly on the power supply for sustenance. The lack of power supply has made it difficult for some of these businesses to thrive.

The Manufacturers Association of Nigeria (MAN) said that MSMEs in the sector spend 40 percent of their expenditure on power.

A report by The Punch quoted MAN as saying that its member companies spent N639 billion on alternative energy sources between 2014 and 2021 while self-generating 14,000 megawatts of electricity.

Apart from power, patronage is also a problem. Local manufacturers say there is preference among Nigerian consumers for imported goods over locally made goods. This act is a challenge that contributes to low growth and exports..

The MSMEs pay multiple taxes and levies from local, state and federal levels which leave business owners with little or no profit at the end of a financial year. A report by The ICIR said that micro businesses in Lagos, Nigeria’s economic capital, pay N513 every day. Most of the taxes are not receipted and could be going into private pockets.

According to PwC Fiscal Policy Partner and Africa Tax Leader, Mr Taiwo Oyedele, MSMEs pay several taxes but lack of accountability obfiscates those taxes.

Lack of workspace is also a challenge that militates against enterprise development in Nigeria. According to the 2020 survey, 7.4 million out of 38.9 million SMEs do not have workspaces to enhance their productivity.  

Inadequate capital for business startups is also an issue. In 2020, about 35.4 million MSMEs owners lacked enough funding for their businesses. This shows that about 92.4 percent of SMEs do not have access to finance that can help in strengthening their businesses. 

A NBS-SMEDAN report said 85 percent of MSMEs in Nigeria did not have access to external financing between 2013 and 2017, noting that only 5.3 percent of them accessed credit within the period.

Way forward  

According to Director, Partnership and other Department of SMEDAN, Dr. Friday Opara, “A lot needs to be done to reposition the MSMEs as agents of socio-economic transformation and to assist in the diversification of the Nigerian economy. Make them more export-oriented. Enhance their productivity and make their contribution significant. Look into the ease of doing business, and ensure that entrepreneurship and innovation are entrenched into the MSMEs activities.”

He told Dataphyte that grants should be given to MSMEs owners as a medium to support their businesses, stressing the need for prompt training for the the businesses to perform well. 

“They should come out with incentives for MSMEs as obtained in India to enhance their performance. Channel more foreign exchange to MSMEs. The government should make more funds available as grants and loans at single-digit interest rates. Build the capacity of the operators in more production processes, and provide more equipment to the MSMEs to make them more competitive in the global market.

“Also, provide market access to the MSMEs at local, national, regional, and international markets. Provide takers facilities to the MSMEs and enhance storage facilities capacity to the MSMEs,” he added. 

Chief executive of AgroEknor, a small export firm, Mr Attah Anzaku, stressed the need to harmonise all taxes to enable MSMEs to grow.

“We need to harmonise all the taxes across all levels of government at this point,” he advised.