Small scale businesses deserve adequate attention
Globally, the micro, small and medium scale enterprises (MSMEs) sector constitutes the spine of most national economies because, as small industry operators, they weather and overcome several challenges to grow and keep jobs for the locals. It was therefore most fitting that the official theme designated by the United Nations Industrial Development Organisation (UNIDO) for the 2026 MSME Day was “Empowering MSMEs through Innovation and Sustainable Industrial Development.” It is important that all relevant authorities in the country move from rhetoric to concrete actions on how to lift the majority of our people out of poverty.
Ordinarily, MSMEs account for 90 per cent of businesses, 60 to 70 per cent of employment and 50 per cent of the Gross Domestic Product (GDP) worldwide, according to the World Bank. In Nigeria, the Small and Medium Enterprises Development of Nigeria (SMEDAN) reports that MSMEs currently represent 96 per cent of the businesses in the country and contribute 75 per cent of the national employment. Unfortunately, this is a sector that has been neglected in Nigeria. Although SMEDAN has launched a N500 million zero-interest for MSMEs in the country, many such similar initiatives have ended up as slush funds for political operatives.
While announcing the effort as part of the package for MSME Day last Saturday, SMEDAN Director-General, Charles Odii, said the association-based model will improve accountability, loan recovery and ensure the funds reach genuine business owners. “We visited traders at one of the markets today to engage directly with them because it is not enough to sit in offices and make policies without understanding their realities,” Odii said. “Many of the challenges they raised border on financing, which is why we are launching the Grow Fund for Small Businesses in Nigeria.” Meanwhile, experts have also identified strengthening the regulatory framework and designing effective support mechanisms as some of the issues that need to be addressed.
However, we do not dispute that the main challenge has always been financing since the conventional banks are not cut out for long term lending needed by MSMEs in the country. It is equally known that these banks are mostly comfortable to lend to short-term business ventures as against start-ups who would need a longer gestation period to pay back. According to most estimates, fewer than five per cent of the MSMEs can access any form of funding support by way of loans or overdraft from financial institutions.
The Central Bank of Nigeria (CBN) had in the past established numerous programmes to support the MSMEs but with little to show for such efforts. For instance, in August 2013, the CBN launched the micro, small and medium enterprises development fund (MSMEDF) with a share capital of N220 billion. The Fund aims to enhance the access of MSMEs to financial services, by channelling single-digit loans at a nine per cent interest rate to them, through the Primary Finance Institutions (PFIs). When the intended end users could not access the facility, the National Collateral Registry (NCR) was introduced. Yet, the problem persists.
The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL Plc.) was created by the CBN with the idea to transform NIPOST into a microfinance bank with branches in all the 774 local government areas of the country. Incorporated in 2013 by the CBN, the Bankers Committee and the Federal Ministry of Agriculture and Rural Development, NIRSAL de-risks the agriculture value chain and enables banks to lend to the sector at rates of between 7.5 to 10.5 per cent. But this limitless potential for inclusive and sustainable economic growth that could be harvested from MSMEs remains largely untapped.
Yet, by sustaining the livelihoods for the very poor among us, MSMEs are the backbone of our society. And they deserve the support of the government at all levels.