SME in Nigeria

 The SME sector is the backbone of major developed economies, as well as important contributor to employment, economic and export growth.In South Africa, SMEs account for 91% of businesses, 60% of employment, and contribute 52% of total GDP. In Nigeria, SMEs contribute 48% of national GDP, account for 96% of businesses and 84% of employment

According to the Nigeria Bureau of Statistics, small and medium-scale enterprises (SMEs) in Nigeria have contributed about 48% of the national GDP in the last five years. With a total number of about 17.4 million, they account for about 50% of industrial jobs and nearly 90% of the manufacturing sector, in terms of a number of enterprises.

Small and Medium Enterprises (SMEs) are critical to the development of any economy as they possess great potential for employment generation, improvement of local technology, output diversification, development of indigenous entrepreneurship, and forward integration with large-scale industries.

In Nigeria, there has been gross underperformance of the SMEs sub-sector and this has undermined its contribution to economic growth and development. The key issues affecting the SMEs in the country can be grouped into four namely: unfriendly business environment, poor funding, low managerial skills, and lack of access to modern technology (FSS 2020 SME Sector Report, 2007).

Among these, the shortage of finance occupies a very central position. Globally, commercial banks which remain the biggest source of funds for SMEs have in most cases, shied away because of the perceived risks and uncertainties. In Nigeria, the fragile economic environment and absence of requisite infrastructure have rendered SME practice costly and inefficient, thereby worsening their credit competitiveness.

So far, the Guidelines for the N200 billion re-financing and restructuring of banks loans to the manufacturing sector has been issued by the Bank, while those for the power sector will be issued at a later date.

The objectives of the 200 billion re-financing and restructuring of banks loans to the manufacturing sector are to:

• Fast-track the development of the SMEs and manufacturing sector of the Nigerian economy.
• Improve the financial position of deposit money banks.

Complimentary to the above, the Bank has also established an N200 billion Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), for promoting access to credit by SMEs in Nigeria. The Scheme shall be wholly financed by the Central Bank of Nigeria (CBN) as stipulated in the Guidelines.

The objectives of the SMECGS are to:

• Provide a guarantee for credit from banks to SMEs and manufacturers.
• Increase the access of promoters of SMEs and manufacturers to credit.
• Set the pace for industrialization of the Nigerian economy.

The overall goal of these two initiatives is to increase output, generate employment, diversify the revenue base, increase foreign exchange earnings, and provide inputs for the industrial sector on a sustainable basis.