Strategies to Promote Small and Medium Enterprises in Nigeria

For a long time to come, Small and Medium Enterprises would continue to be a dominant factor in the industrial acceleration process in Nigeria. It has aided the economic empowerment of citizens, thus enhanced the Gross Domestic Product (GDP) of the nation.

Small and Medium Enterprises however, are plagued with certain obstacles which militate against attaining the zenith growth in Nigeria.  These constraints are managerial, technical, commercial, financial and infrastructural.

According scholars, the financial problems have their origin in the humble circumstances of the small businesses. Managerial problems arose from the entrepreneur’s limited education and training in entrepreneurship development, while the technical problems were due to his limited knowledge in project planning and appraisal as well as little or no exposure to modern technology. The commercial problems consisted of his inability to organise market surveys and product distribution channels. The financial problems include lack of adequate capital and the tempting urge to misappropriate the profit of such ventures.

The myriad of problems militating against the establishment and growth of small and medium enterprises explains why it is expedient to embark on a deliberate policy and strategies of promoting the development of such industries in Nigeria.

From the above, inadequate finance and poor infrastructural facilities is a major challenge faced by SMEs in Nigeria. Most small and medium enterprises have not succeeded in getting credit facilities because they could not meet the pre-requisites for obtaining the credits. The efforts of the government to assist the sector in this regard had yielded expected results because of its lean resources, poor implementation of their programmes, and other competing demands from other sectors on the lean resources of the government.

As a strategy for ameliorating the problem lack of funds, it is suggested that a credit guarantee scheme should be put in place whereby government established institutions would guarantee loan made by conventional banks to the Small and Medium Enterprises, while the interest on such loans should be made favourable. This is in addition to the creation of special funds or financial institutions whereby soft loans and credit facilities would be made available to the Small and Medium Enterprises.  In-built mechanisms must be made to ensure that the loans/credit facilities are actually given to the right persons. It must also be ensured that such loans or credit facilities are revolving. This will not only ensure the continuity of the facilities but will also enable many entrepreneurs to have access to them.

Furthermore, two or more small and medium enterprises should also be encouraged to come together and combine their resources in order to obtain loans for which they would be collectively responsible. This is in consonance with what operates in Venezuela, Argentina, Chile, and Brazil.

To avoid default in repaying the loans/credit facilities, the lending institutions are expected to have inspectorate role oversight on the utilisation of the loan facilities as well the turnover of such enterprises. The government is also required to provide tax holidays for such businesses for the duration the loans are being repaid.

On the provision of infrastructural facilities for the use of SMEs, it has been discovered that the Federal Government of Nigeria has not been able to come to grasp with this issue. The epileptic supply of electricity, impassable road network, inadequacy of water supply, and non-availability of other infrastructure have adversely affected the establishment and development of SMEs.   It, therefore, becomes imperative for the private sector to join hands with the government in the provision of these facilities. Hence, an Intervention Fund titled the ‘Industrial Infrastructural Facilities Funds’ (IIFF) is being recommended as a strategy to remedy the situation.

In this case, it would be made mandatory for businesses to contribute a proportion of their profits into a pool with a view to providing infrastructure for the use of the industries. The government would also be required to make annual or periodic contributions to the fund. Representatives of the government and those of the contributing businesses would administer the fund. If properly managed, the fund would go a long way to complementing the activities of the government in the provision of infrastructural facilities for the industrial sector.

It is imperative we recommend however that since the government cannot single-handedly shoulder the promotion of the development of Small and Medium Enterprises, the organised private sector should join hands with the government.

Also in view of the fact that most Small and Medium Enterprises do not possess adequate collateral which banks would require before granting loans, the establishment of a credit guarantee scheme is suggested whereby the government could guarantee loans to Small and Medium Enterprises. This would encourage banks to advance loan to sub-sector.

Sulaiman Bukola Hauwa, is a final year Mass Communication, Kwara State University, Malete