Empowering MSMEs to Stimulate Economic Growth
Though the new National Policy on MSMEs came with mouth-watering promises to reposition the sector and make the operators better prepared to compete favourably with their peers at the regional and global stages as well as create job opportunities, the fai
As pointed out by the Minister of State for Industry,Trade and Investment, Mrs. Mariam Katagum, at the 27th edition of the National Micro, Small and Medium Enterprises (MSMEs) Clinic in Gombe State, creating opportunities for MSMEs is critical for increasing productivity, job creation as well as boosting the economy.
She noted that the contribution of small businesses to the country’s Gross Domestic Product (GDP) has increased to about 50 per cent and accounts for over 80 per cent eighty per cent of employment. Thus, they should be provided the enabling environment to thrive.
Although the minister had assured that the federal government is not relenting on its efforts to partnering stakeholders across all sectors to ensure that MSMEs have the support they need to grow, the operators are still faced with a myriad of challenges which had limited the positive results expected from them as catalysts of growth.
Further buttressing the constraints confronting the sector, Vice President Yemi Osinbajo, had December last year, called on government regulatory agencies to do more to improve the ease of doing business for small businesses rather than constitute bottlenecks to their smooth operations in the country.
Though, he acknowledged the fact that the Federal Ministry of Industry, Trade and Investment was working to remove obstacles in the operation of small businesses, he added that, “We need to take a second look at the way we regulate SMEs in the country.”
The vice president, during inauguration of the Abuja Chamber of Commerce and Industry (ACCI) Convention Center in Abuja, said government policy and private sector investments in small businesses would go a long way in determining the country’s economic trajectory.
Osinbajo, particularly maintained that businesses cannot thrive if “government officials considered small businesses as obstacles” adding that government regulations must not constitute roadblocks to the growth of SMEs but rather serve as business facilitator going forward.
In the same vein, the Managing Director/ Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said there are presently too many problems confronting businesses in the country, especially MSMEs, which the government had continued to pay deaf ears to.
He said the menace of multiple taxation at both the federal and states levels remained a major source of concern to investors especially start-ups.
According to the former Director General, Abuja Chamber of Commerce and Industry (ACCI): “When a new business starts and there are too many taxes coming on their heads, of course, you don’t expect that business to grow.
“Many times, taxes or levies we’ve never heard about will be imposed on businesses that are just starting today or tomorrow.”
Even though the MSMEs sector had witnessed unprecedented funding intervention by the government, the Central Bank of Nigeria (CBN) and private sector in recent times, following the devastating impact of the COVID-19 pandemic, the Director-General, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Dr. Umar Dikko Radda, believed that the stringent requirements put in place by commercial banks as well as high interest rates had made it difficult for small businesses to meet most of the requirements for proper financing.
It is against the backdrop of these constraints to the development of small businesses that the emergence of the much-awaited National Policy on MSMEs (2021-2025), ushers in tremendous hope and opportunities to reset the sector towards playing its important role in national development.
According to Radda, the revised framework will ensure that small businesses are henceforth recognised by their turnover rather than asset base.
The federal government, also approved for the split of micro enterprises into Nano/ Homestead and Micro Enterprises.
Giving reasons for the choice of turnover over asset base in identifying MSMEs, moving forward, the SMEDAN DG, whose agency spearheaded the development of a new roadmap for the sector, fingered the rising inflation and currency devaluation among others for the decision.
He said: “Inflation and naira devaluation have eroded the asset levels set in 2007 when the first national policy was approved.
“As a result, comparison of new investments with the old becomes clumsy and misleading – that’s not the case when comparing turnovers of the same time; certifying asset values are more complex than determining turnover values.”
Under the new regime, MSMEs are further categorised as nano, micro, small and medium enterprises.
The nano/homestead business units are required to have one to two employees with turnover of less than N3 million, while micro enterprises are required to employ three to 25 staff with turnover of N3 million to N25 million.
Also, small enterprises are required to employ between 10 to 40 staff with turnover of over N25 million while medium enterprises are to have between 50 to 199 staff and turnover of over N100 million before they can be qualified as such.
Among other things, Radda, said fintech and other tech-driven companies have distorted the traditional relationship between asset base
and business turnover, adding that experience from comparable countries, including India, showed they have all shifted from using assets in classifying their MSMEs.
Radda, added that the company income tax waiver/incentive for small businesses under the Finance Act 2020 is also tied to turnover and not asset base.
Benefits of new policy
Essentially, the new national policy on MSMEs will facilitate the creation of a minimum of 41 million jobs within the next three years.
Radda, also said framework will facilitate an enabling environment for small businesses to function at maximal capacities as well as address grey areas in their operation, pointing out that the multiplier effect a healthy business environment will allow the MSMEs to boost employment opportunities in the country.
He further explained that issues that border on compliance by small and growing businesses and the need for more innovative funding windows had received significant attention in the revised policy blueprint which also initiated a symbiotic relationship and synergy among all key MDAs with mandates that influence the performance of MSMES.
He noted that the desire to consistently and sustainably realise the agency’s mandate and ensure that MSMEs contribute significantly to the national GDP and economic growth, formed part of the several reasons SMEDAN embarked on the review of the policy.
He noted that the review had become inevitable to address certain interventions, initiatives and socio-economic issues both at the national and global space with implications on the operations of the MSMEs and large enterprises.
Further expatiating on the framework, SMEDAN boss said: “You know initially we had the definition of MSMEs based on asset and labour. But now because it’s no more visible – you will see a one-man business but has a turnover of about N100 million or N1 billion. So we are classifying it now based on the turnover as well as the number of people employed.”
He pointed out that SMEDAN remains the custodian of the policy on MSMEs, stressing that the SMEs policy was first developed in 2006, with the support of the UNDP and other development partners.
He added that the policy had been due for a review in order to reflect new realities after it was altered in 2010 and later in 2018.
He stressed that the performance and wellbeing of the enterprises are largely dependent on the existence and implementation of a functional national policy on MSMEs.
Katagum, however, assured that said the approval by the Federal Executive Council (FEC) of the MSMEs policy provided the framework to resolve the challenges faced by the sub-sector.
The minister said the revised policy which accommodates key changes that have occurred in the national and international socio-economic scene, was a product of deep and wide consultations with critical stakeholders across the country such as MSMEs operators, policy makers, academics/researches and development partners, both local and international.
But, as correctly observed by the minister, it is purely through implementation of the policy that MSMEs would be set on the path of sustainable growth and development.
Yet, the big elephant in the room, has remained the effective implementation of the policies by the government - an issue which has retarded projected successes of several other blueprints in various sectors of governance and the economy in particular.
As rightly alluded to by Radda, “there is no doubt that painstaking efforts have gone into the preparation of this document.
“Our desire that it should not turn out to be another document that will end up in the shelf is the reason we are using this opportunity to reach out to every stakeholder at all levels.”
“Implementation is very critical and we are confident that every stakeholder will willingly execute assigned responsibilities as detailed in the Implementation Matrix.”
He said one principal area of action was the active engagement of the states in implementing the policy “because we are aware that the practitioners and stakeholders are residents in the states.”
“Consequently, we are pushing the states to set up State Implementation Committees and to revive moribund committees in the where they have been inaugurated but not active.
“In the past few months, we have inaugurated State Implementation or State Council on MSMEs in Kwara, Osun, Benue, Jigawa and Abia States. This is addition to the 17 State Committees that were already in existence.
“Let me use this opportunity to appeal to States that are yet to inaugurate their Committees to do so within a reasonable time to enable seamless implementation of the newly revised policy.”
As a result, comparison of new investments with the old becomes clumsy and misleading – that’s not the case when comparing turnovers of the same time; certifying asset values are more complex than determining turnover values