How small businesses can boost Nigeria’s GDP, by expert
An industry expert has highlighted how small businesses can boost the Nigerian Gross Domestic Product (GDP), while proffering solutions to challenges facing the entrepreneurs.
This is even as various estimates have said MSMEs constitute over 50 per cent GDP, as well as generating largest proportion of employment in the country.
The Daily Times checks puts their numbers in excess of 37 million, while more than 97 per cent of these businesses operate in the Micro space with less than 10 employees with asset base not exceeding N10 million.
Commenting on the challenges facing the sector, Managing Director/ CEO, Quest Advisory Services Ltd., Mr. Bayo Rotimi, said approximate 90 per cent of their funding requirements come from Personal savings as well as Family and Friends.
He notes that despites generating the largest proportion of employment in the country, the MSMEs still suffer from multiple challenges including but not limited to the following:
Lack of access to finance, financing under the right conditions, pricing, tenor, relaxed conditions (collateral), proposed collateral registry a step in the right direction etc.
Also, lack of access to markets; Gross under capacity amongst owners and managers of MSMEs poor education and skills, limited to no R&D, lack of basic systems, structures, processes, governance, financial management, automation etc; Infrastructure deficits, power, transportation, water, storage etc; Multiple taxation by agents of the Federal, State and Local Governments and Unfriendly business and operating environment, policy inconsistencies.
Others are uncontrolled influx of foreign goods and services; and ease of doing business challenges.
He, therefore, observed that government after government in the country develops and rolls out plan after plan articulating the problems and proffering solutions, but often face with challenges implementation.
“Nonetheless, in addition to the myriad of policies and programs outlined by the federal government, I would like to proffer the following thoughts that I believe would further accelerate the turnaround in the MSME space that we so desperately seek.”
According to him, whilst I acknowledge the current pressures on the nation’s finances, I reckon that the quickest way to catalyse the MSME space is to consider providing 3three to five year tax holidays.
“All that is required at this time is to get all MSMEs to register onto a central database (starting at the CAC) and using the recommended tax holidays as an incentive.”
He explained that the government will ultimately generate significantly increased tax revenues from a much larger pool of viable businesses rather than the current situation where, “we have an appallingly low level of tax compliant businesses and it actually seems like the few compliant businesses are made to bear the financial burden of the millions of businesses operating outside the tax net.”
Mr. Rotimi, also pointed out that access to finance is another factor to be looked into, even though it should be approached from a totally different perspective.
“A lot of the special intervention programs rolled out by successive Governments in the recent passed have almost always been routed through Banks including the new kid on the block, the Development Bank of Nigeria.
“However the challenge remains the gross under capacity of banks and bankers to provide the business advisory and support services required by the MSMEs.
“All businesses require finance but in my view they require Business advisory services even more. Bankers ignore this space because they themselves lack knowledge in this area. Banks with their thousands of branches are the perfect development partners but only if they can scale up”, he said.
The finance analyst, therefore, urged that CBN to engage Bankers to ensure capacity is speedily built.
“I must at this juncture acknowledge the efforts of the BOI and other DFIs who remain committed to developing this most critical stakeholder group.”
Although, he commended the efforts of the Office of the Vice President with particular regard to the MSME clinics often organized, but noted that weak capacity on the part the MSMEs are major culprits, as the capacity to run proper, finance and investment ready businesses is also sorely lacking.
Quest Advisory Services boss, charged owners of MSMEs to always strive to focus on self development, adding that here are myriads of resources available nowadays.
Consequently, he suggested alternative forms of financing grant, citing (YouWin) and equity investments (restructuring and re-launching the failed SMEIS scheme).
“But this time using specialist finance professionals like Investment Bankers, like Asset Managers, like Private Equity firms and Venture Capitalists who have both an equity mindset and the technical capacity to support businesses in the areas of strategy, systems, structure and processes.”
