Experts decry FG, financial institutions’ neglect of MSMEs

Experts have bemoaned bottlenecks created by government and financial institutions, noting that such challenges are crippling the development of Micro, Small and Medium Enterprises (MSMEs) in Nigeria despite their huge potential for economic growth.

They gave the submission at the Lagos Chamber of Commerce and Industry (LCCI) Small and Medium Enterprises Group (SMEG) Webinar on the theme: “Ensuring SME Growth in a Challenging Economy.”

Partner & West Africa Tax Leader, Deloitte, Yomi Olugbenro, who spoke on “Managing Inflation in a challenging economy,” said SMEs account for 90 per cent of industrial businesses, 63 per cent of trade or agricultural companies and employ 86.3 per cent of the national workforce, while micro businesses alone account for 99.8 per cent of total SMEs in the country.

Olugbenro said challenges impacting MSMEs in Nigeria include rising inflation, which is currently at 20.77 per cent and has a severe impact on consumer spending as well as hinders the expansion of SMEs.

He also pointed at exchange rate volatility, leading to supply shocks and high operating costs; insecurity limiting operations, logistics and distributions especially those playing in the agric space.

Others, he said, included epileptic power supply affecting the level of industrialisation and growth of SMEs, noting that alternative power is more expensive than power from the national grid.

He also lamented credit accessibility challenges facing SMEs, which he said include, high cost of funding and short loan tenor.

According to him, the interest rate on loans to SMEs is as high as 22 per cent to 28 per cent per annum, while citing SMEDAN’s record of 48 per cent of MSMEs identified the high cost of financing credit as a critical challenge.

He also pointed at poor credit history, adding that most entrepreneurs do not properly track and record their business transactions.

He advocated adopting an escrow funding model to mitigate the diversion of credits, improved credit rating systems for SMEs and expanded credit risk guarantee coverage, wide implementation of cluster financing across major markets and diversifying SMEs loan portfolios following a gender-agnostic and sector-agnostic strategy.

Olugbenro also called for partnerships with business consultants to provide SMEs with technical support and create access to the market as well as infrastructure-based policies that encompass efficient power distribution to developing industrial clusters.

He also called for improved financial reporting capacity through access to tools and technologies as well as making SMEs more relevant by ensuring backward integration and inclusion in the supply chain among other solutions.

The President, the Lagos Chamber of Commerce and Industry (LCCI), Dr. Michael Olawale-Cole, said SMEs are the engine room of growth of every economy globally and a major contributor to Gross Domestic Product (GDP).

He said SMEs are in need of support as they are the worst hit by the pandemic and climate change, adding that they face barriers such as lack of access to finance and interest rate.

The LCCI boss called on policymakers to eliminate the barriers and ensure physical and monetary policies as well as an intervention to promote small businesses.

He urged SMEs to explore opportunities in exports and technology to expand productivity while calling on the government to engage the organised private sector to alleviate the harsh economic conditions affecting SMEs in the country.

The Director, Enterprise Development Centre, Dr. Peter Bamkole, who spoke on “capacity building for SMEs in a challenging economy,” said, while there are economic challenges, SMEs are caught unaware as they are not prepared to wade through them.

He said research carried out in the aftermath of the pandemic on SMEs, showed that 93 per cent closed their business, reduced staff strength and made losses, while seven per cent thrived in the difficult situation.

Bamkole said further analysis revealed that the seven per cent thrived due to digital enablement of business processes, and collaboration, which saw the growth of the logistics chain as well as reinventing business models and introduction of circularity.

He urged SMEs who depend on foreign exchange markets for their businesses to rethink their business strategy while advising them to venture into export to optimise the advantages of AfCFTA.

Head, of Digital Products Fate Foundation, Mrs. Oluchi Johnson, who spoke on “deployment of technology for SME growth in a challenging economy,” said digitisation is an important driver for business growth.

She said most businesses that thrive in challenging environments deploy technology to simplify their processes, such as the adoption of software, collaboration, cloud computing for data storage and security, QR code for business accounts, high spectrum broadband, social media accounts and the internet of things among other digital tools.

Johnson urged SMEs to deploy technology as it helps businesses reduce cost, boost productivity, and increase and widen access to global markets.