Challenges Facing SMEs In Nigeria | Independent Newspapers Limited
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Challenges Facing SMEs In Nigeria

Posted: May 13, 2015 at 2:10 am   /   by   /   comments (0)
. Aganga

. Aganga

By Ikechi Nzeako



It is the responsibility of government to provide employment and security for the people, among other things. However, since government cannot provide full employment for the people, what it does is to provide the enabling environment for non-state actors to bridge the gap. These non-state actors include small and medium scale enterprises, among others.

According to Ibrahim Gondah Male of the Department of Business Administration, Bauchi State University, Gadau, small and medium scale enterprises are the “engine of growth and catalyst for socio-economic transformation of any country, especially in a developing country like Nigeria.

He added that they are a veritable vehicle for the achievement of national macroeconomic objectives in terms of employment generation at low investment cost and enhancement of apprenticeship training.

But running small and medium scale enterprises in Nigeria is a most difficult thing because of the harsh economic environment. It is as a result of the harsh economic environment that many small and medium scale enterprises collapse or are operating on the margins.

Mba Okechukwu Agwu and Cletus Izunwanne Emetin, both SME operators, argue that in spite of the difficult and harsh economic environment in Nigeria, there has been a phenomenal growth of micro and small scale enterprises due mainly to the people’s quest to be self-employed and not because it is easy to establish or manage.

They also said that the increasing demand for consumer products has created a large market for small and medium enterprises in the country.

Agwu and Emetin posited that small and medium enterprises have contributed immensely to the growth of Nigerian economy, adding that the sector also contributed to the national objective of creating employment opportunities, training entrepreneurs, and generating income and providing a source of livelihoods for the majority of low-income households in the country.

However, B.A.N. Onugu, said that a major challenge facing small and medium enterprises operators is lack of finance. Lack of capital, according to him, has been identified as the most serious problems of establishing and running small and medium enterprise as other problems can be solved with adequate capital. Many operators face this challenge and are often constrained to rely on personal and family funds to carry out their business.

They also do not have adequate capital to finance the procuring of operational equipment and facilities.

Onugu said that some of the challenges facing small and medium enterprises operators are external to them, noting that they have to contend with changes in the taxation and regulatory regimes as well as struggle with policy changes and inconsistencies that most often affect the projections of small and medium enterprises operators.

He said there is also the issue of bad and inadequate infrastructure in the country, saying that roads are dilapidated, there are power outages while the cost of electricity is very high. He said apart from paying high electricity bills, they also have to pay huge sums to buy generators, buy diesel and other fuels at exorbitant prices, adding that Small and Medium Enterprises operators also have to provide the water they need to produce, as well as contend with the payment of multiple taxes to the different tiers of government.

He also noted that operators in the sub sector would have to pay vigilance groups, who make enormous demands on them, so as to guard against their equipment and facilities from being vandalized.

“Small and medium enterprises operators, apart from producing under harsh and unfriendly conditions, have difficulty accessing the market. This is because the roads are bad and dilapidated and this adds to the unit cost of producing their products.

“Given that small and medium enterprises operators do not have adequate funds to carry out their business, they are also unable to attract experts who can help to grow the business,” he said.

Onugu stated that the catalytic roles of small and medium enterprises have been proven in many countries of the world, both in developed and emerging markets. According to him, they contribute substantially to the Gross Domestic Production (GDP), export earnings and employment opportunities of these countries. He said small and medium enterprises have been widely acknowledged as the springboard for sustainable economic development, explaining that apart from the fact that they contribute to the increase in per capital income and output, they also create employment opportunities, encourage the development of indigenous entrepreneurship, enhance regional economic balance through industrial dispersal and generally promote effective resource utilisation that are considered to be critical in the area of engineering economic development

Micro and small-scale enterprises in Nigeria have not performed creditably well and they have not played expected significant role in economic growth. They equally have not influenced apprentice training so as to accelerate employment and poverty alleviation in order to foster economic development in Nigeria. This situation has been of great concern to the government, citizen, operators, practitioners and the Organised Private Sector. With the realisation of the potential of the small and medium enterprises, governments at different levels in Nigeria have put up a lot of support programmes to promote and sustain their development. It is believed that massive assistance; financial, technical, marketing and managerial from the government are necessary for the small and medium enterprises to grow. There is the need for governments to step up efforts to promote the development of small and medium enterprises through increased incentive schemes including enhanced budgetary allocation for technical assistance programmes.

However, former managing director of the Bank of Industry, Evelyn Oputu, said that some of the challenges that needed to be addressed immediately for the sub-sector to thrive included finding solutions to the high cost of doing business occasioned by poor infrastructure (power, roads, water), multiple taxation, high cost of legal documentation of credit facilities at both the states Lands Registries and the Corporate Affairs Commission (CAC); bureaucracy in obtaining title to land and State Governors’ consent to mortgage property; inadequate capacity building on the part of the SMEs in the areas of entrepreneurship, and skills acquisition, resulting in the perception of the sector as high risk and poor attitude to loan repayment by borrowers in the sector.

Many experts and stakeholders agree that there is need to stimulate, monitor and coordinate the development of the small and medium enterprises sector.

They also said that there is the need to initiate and articulate policy ideas for the growth and the development of the micro, small and medium enterprises.

They said that government should promote and facilitate development programmes, instruments and support services to accelerate the development and modernisation of small and medium enterprises operations in the country.

The experts and stakeholders said there is the need to link small and medium enterprises to internal and external sources of finance, appropriate technology, technical skills as well as to large enterprises.

They also emphasised the need to promote information and provide access to industrial infrastructure such as layouts, incubators, industrial parks in the country so that small and medium enterprises can thrive.

They also stated that there is the need to make policies consistent and friendly, adding that there is the need to harmonise taxes so that small and medium enterprises operators in the country would not face the burden of multiple taxation.