Transcript GOVERNMENT`S DRIVE TOWARDS SMEs

GOVERNMENT’S DRIVE
TOWARDS SMEs
DEVELOPMENT IN
NIGERIA
A Paper Delivered By
OLUSEGUN AGANGA
HONOURABLE MINISTER OF TRADE AND INVESTMENT
AT THE
UK-NIGERIA SME NETWORKING EVENT
7TH MARCH, 2013
Welcome to NIGERIA
Fig. 1 MAP OF NIGERIA Showing Major Towns and
Neighbouring Countries
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NIGERIA-GENERAL OVERVIEW
It is Africa’s most populous country with a total
land area of 923,678Km2.
 Growth rate of 2.45%.
Nigeria, a multi-ethnic country of about 170
million people, is located on the west coast of
Africa.
Nigeria operates a democratic, decentralized,
federal system of government comprising a
federal capital territory (FCT), 36 States and
774 LGAs.
There are six geo-political zones.
The Federal Capital and seat of government is
Abuja.
There are three dominant ethnic groups: the
Hausa-Fulani, the Yoruba and the Ibos.
However, about 250 ethnic nationalities co-exist
with them.
Huge untapped investment opportunities in the
SME Sector and a mixed economy framework.
INTRODUCTION
The Micro, Small and Medium Enterprises (MSMEs)
have been known, all over the world, to be engines of
economic growth and contributors to employment
generation, wealth creation, poverty alleviation and
food security.
Recent data provided by the National MSMEs
collaborative survey 2010, put the number of Micro,
Small and Medium Enterprises (MSMEs) in Nigeria
at 17,284,671 with total employment put at
32,414,884.
Deliberate efforts must be put in place to grow
these numbers if we must achieve our national vision
of being among the 20 most industrialised nations by
the year 2020.
Hence SME contemporary development challenges
must be critically addressed in a structured and
efficient manner in order to achieve our national
goal of job creation in tandem with the
Transformation Agenda.
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MSMEs DEFINED
CATEGORY EMPLOYEES
ASSETS (N’M)
(excluding land
and buildings)
MICRO
SMALL
MEDIUM
Less than 5
5-less than 50
50-less than
500
NB:
Less than 10
10-49
50-199
Where there is an inconsistency between
employment and asset base, employment
criterion will prevail.
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SMEs AND THEIR RELEVANCE
Employment
Generation
Enabling adaptive
technology and
skill acquisition
Ensuring sound
competition
Mobilization
of local
resources
SMEs
Platform for
Industrializati
on
Wealth creation,
income generation
and poverty
alleviation
Mitigation of ruralurban migration
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Creation of
new industries
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CURRENT STATE OF MSMEs IN NIGERIA
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SME CONTRIBUTION TO GDP AND
EMPLOYMENT GLOBALLY
 SMEs in high income countries contribute
55% to GDP and over 65% of total
employment .
 In middle income countries SMEs and informal
enterprises account for over 70% of GDP and
over 95% of total employment
 In low income countries SMEs and informal
enterprises account for over 60% of GDP and
over 70% of total employment
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DETAILS ON THE NIGERIAN MSME SURVEY
 The survey was conducted in all 36 states of the Federation
including the Federal Capital Territory, Abuja
 Divided into household, agriculture and business components.
 Over 300 micro enterprise households per state were visited while
4000 small and medium enterprises cutting across 12 sectors of
the economy were covered.
Enterprise Group
Company Size
(Employees)
Survey
Micro
1-9
National Integrated Survey
of Households (NISH)
Small
10-49
National Integrated Survey
of Enterprise (NISE)
Medium
50-199
National Integrated Survey
of Enterprise (NISE)
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MSME’s Contributions to the Nigerian Economy
46%
MSME
Other contributions
 Q4 2012 Nigeria GDP grew by 6.17% surpassing the
forecasted 5.34%
 MSMEs account for 46% of Nigeria’s GDP (2010)
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MSME’s Contributions to GDP by sector
 For example MSMEs contributes 99.13% of real estate,
renting and related business activities to GDP while 98.01%
of GDP is contributed by the Agricultural sector.
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Breakdown of SME Headline figures
 Total estimated to be 17,284,671 MSMEs in Nigeria.
 Of the total number micro enterprises account for the majority
(99.87%) of the MSMEs in Nigeria with 17.26 million enterprises
 Lagos state has the highest number of small and medium
enterprises (4,535) while Osun state has the least (100).
 Lagos state has the highest number of micro enterprises
(880,805), followed by Kano state (872,552), while FCT recorded
the least (272,579).
 The total number of persons employed by the MSME sector as at
December, 2010 stood at 32,414,884.
 The female entrepreneurs accounted for 42.1% in the ownership
structure of microenterprises as against 13.57% in small and
medium enterprises.
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MSME Contribution to the economy (Export
earnings)
Export Earnings (%)
Nigeria
Japan
UK
Hong Kong
USA
India
Hong Kong
India
Japan
Nigeria
USA
UK
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
 SME Development holds great potential for Nigerian
export and Balance of Trade improvements
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Low Access to Finance from Commercial Banks
Commercial Banks Loans to small scale enterprises
as a percentage of Total Credit
60.00%
50.00%
48.79%
40.00%
32.18%
30.00%
22.19%
20.00%
10.00%
22.94%
25.00%
16.96%15.49%
13.26%
8.76%
6.59%
8.63% 7.45%
3.62% 2.67%
1.02% 0.85% 0.17% 0.18% 0.16%
0.00%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Commercial Banks Loans to small scale enterprises as a percentage of Total Credit
 Despite Increased Government Support to SMEs,
Commercial banks have reduced their support for SMEs
over time.
Source: CBN
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CONTEMPORARY DEVELOPMENT
CHALLENGES OF THE SMEs SECTOR
Poor access to affordable finance
leading to inadequate working capital.
Lack of work space.
Poor access to both local, regional &
international markets leading to poor
business turnover.
Obsolete technology leading to inability
to compete globally.
Inadequate government support and
encouragement.
Weak infrastructure leading to high
cost of doing business
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CONTEMPORARY CHALLENGES CONTD…
Absence of patent right and unprotected
intellectual property rights.
Low capacity utilization.
Non insurance of business risk.
Non effective implementation of the
National Policy on MSMEs.
Poor management of business operation due
to lack of business management skills.
Administrative barriers in doing business,
Multiple permits and fees are required at
the state and municipal level, often
spontaneously.
Absence of a general rating scheme
Non availability of qualified artisans (skill
gap)
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GOVERNMENT PAST EFFORTS AT
ADDRESSING THE CHALLENGES
The establishment of Industrial Development
Centres (IDCs) in the 1960s.
The establishment of the National Directorate of
Employment (NDE) in 1989.
The establishment of the Bank of Industry (BOI)
in 2001 from the defunct Nigerian Industrial
Development Bank (NIDB) and the Nigeria Bank
for Commerce and Industry (NBCI).
The establishment of the Small and Medium
Enterprises Development Agency of Nigeria
(SMEDAN) via SMEDAN ACT 2003.
The launching of the Micro Finance Policy,
Regulatory and Supervisory Framework for Nigeria
in 2005 which resulted in the establishment of
Microfinance Banks.
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GOVERNMENT PAST EFFORTS AT
ADDRESSING THE CHALLENGES
The N200 Billion intervention fund for refinancing and restructuring of Banks’ loans to the
manufacturing sector.
The establishment of the N200 Billion Small and
Medium Enterprise Credit Guarantee Scheme
(SMECGS) in 2010 by the Central Bank of Nigeria.
The Agricultural Credit Guarantee Scheme Fund
(ACGSF) launched in 1977.
The Nigerian Incentive Based Risk Sharing System
(NIRSAL) for agricultural lending launched in
2011.
The National Economic Reconstruction Fund
(NERFUND) was set up in 1989 to catalyze the
SME sector’s growth through medium & long-term
funding.
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GOVERNMENT PAST EFFORTS AT
ADDRESSING THE CHALLENGES
The N100 Billion bond-funded Cotton, Textiles and
Garment Industry Revival Scheme.
The Bank of Agriculture (BOA) has emerged from
the Nigerian Agricultural, Cooperative and Rural
Development Bank (NACRDB ).
Facilitating and guaranteeing external finance
through the World Bank, African Development
Bank (AfDB), International Finance Corporation
(IFC) and other international institutions willing
and capable of assisting MSMEs.
Marching funds from big Entrepreneurs by BOI
such as the N5 billion by Aliko Dangote.
Marching funds from States by BOI.
Youth Enterprise With Innovation In Nigeria
(YOUWIN)
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WAY FORWARD
Renewed commitment by all tiers of government to drive
the overall development of the MSMEs sub-sector in
Nigeria.
Establish the National Credit Guarantee Scheme for
MSMEs to create an effective access to affordable
finance for MSMEs.
Establish a comprehensive National MSME Rating
Information and Database.
Pump more funds into infrastructure development
through PPP and ensure value for money.
Effective implementation of the National Policy on
MSMEs.
Deliberate incentives should be put in place for the
development of SMEs as is done in other jurisdictions.
Eg,. Equipment incentive, Technology incentive, Marketing
incentive and National Awards for MSMEs incentive.
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WAY FORWARD…
Develop an integrated Industrial Development
Centres (IDCs) with effective BDS.
Establish the National Council on SMEs.
Promote and develop the Venture Capital sector
and other forms of making funds available at
affordable rates including listing on the stock
exchange.
Undertake transformational projects that will
take MSME development to specific sectors and
rural areas e.g. OLOP for artisanal miners, S-VAP,
etc.
Remove barriers to access to finance, effective
BDS and increased productivity.
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CONCLUSION
The SME Sector provides the platform for
opening the country to global competitiveness
and prosperity required to elevate Nigeria to
an economically advanced nation.
MSMEs need all the support from all
stakeholders in order to operate optimally and
sustainably in this era of open markets,
competition and global economic & financial
crisis.
FMTI will continue to support the
development of SMEs in Nigeria for
sustainable economic growth and development.
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THANK YOU FOR
LISTENING
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