Over-regulation is affecting Nigeria’s MSMEs

Over-regulation is affecting Nigeria’s MSMEs
Photo by Benjamin Child- Ask Nigeria

Lack of basic amenities has been a major setback to the country’s MSMEs growth.

During an interview session with Segun Kuti-George, the immediate past chairman of the Nigeria Association of Small-Scale Industrialists, Lagos branch with Ediong Ikpo regarding the challenges of Micro, Small and Medium Enterprise (MSME) businesses are facing and their importance to the nation’s economic development. He first explained that throughout the world, MSMEs are a driving force behind the development of a country’s economy. Taking America as a case study, MSMEs account for around 60% of their industries, and the same goes for China, India, and other industrial nations. If so, why? MSMEs feed major industries by producing small components and adding value to agricultural goods, which become raw materials for large businesses.

More specifically, in the instance of Nigeria, it was claimed by the (SMEDAN) Small and Medium Enterprise Development Agencies of Nigeria that there are around 41.5 million SMEDAN and MSMEs in Nigeria, of which more than 95% are categorized as micro companies. This demonstrates that MSMEs are an essential component of Nigeria’s economic sector, and they are directly responsible for the creation of 60 percent of all the jobs throughout the country. This shows how vital this sector is.

The MSME industry lacks adequate funding and support.

When it comes to the challenges facing MSMEs, this has been the case from the start, which includes the lack of access to funding, support services, markets, infrastructure, information and adequate technology. Small and medium-sized businesses (SMBs) have struggled greatly with securing funding, because of the danger they pose, and this has made financial institutions avoid dealing with them. However, those fund providers failed to understand an economic theory that states, “the higher the risk of investment, the higher the returns.” They have concentrated their financing in the control of larger industries to the point that over 70% of Nigeria’s funding loans are held by fewer than 30% of its population, even though those high-risk industries are where they can receive their huge profits.

Furthermore, aside from this cost at issue, the cost at which those funds are lent out is high. An interest rate of about 25 to 30 percent cannot help to keep production going. This kind of 20 to 30 percent interest has contributed to the backwardness of the MSMEs’ growth in the country. However, as an association, a lot of advocacies has been made with the government and different funding agencies, and the efforts have resulted in some of the government’s programs being implemented in recent years, such as the Central Bank of Nigeria interventions, the latest loans, the CBN’s 100-for-100 intervention, and the establishment of the Bank of Industry and the Bank of Agriculture. Unfortunately, when these items are implemented, they often overlook the needs of MSMEs. They create barriers that they can’t get over.

Over-regulatory and other challenges are hindrances to the MSMEs’ growth.

Although regulations are necessary to keep production under control, the MSME sector has been over-regulated. The Nigeria MSME is in association with some international regulatory bodies, but after making those regulations, their country’s conditions and infrastructure help in implementing them, in the case of Nigeria, there are issues like bad electricity, bad transportation systems, and more, which are hindrances to this. Aside from that, the Nigerian economy is dealing with inflation because when a producer’s cost of production is high, the product will be high as well because we rely heavily on exports. And when compared with other countries, things are not as bad because their MSMEs are not facing this problem. After all, they are not facing the issues of infrastructure, information, and technology.

Despite Nigeria having over 200 million people, there is still a market challenge because many people prefer foreign goods over local ones, whether they are good or not. Therefore, there is a need to campaign for a shift in preference for the people, to wear what we create, eat what we make and consume items manufactured in Nigeria. Because of this, our packaging needs improvement and it is being worked on because some of our items’ packaging is now superb. But still, MSMEs lack some expertise because Nigeria doesn’t produce the machines they use. Therefore, they have to import them and when they can’t, they make use of the traditional ones.

Nigeria needs to produce what it needs and consume what it produces.

Lastly, all those challenges are interrelated. Without exports, we can’t generate foreign currency for people in need. The solution to this is that we produce machinery, equipment, and raw materials that industries import. If these products are produced locally, we won’t need to import them and foreign currency pressure will be reduced, other countries are not affected because they produce what they need, therefore we also need to produce what we need and consume what we produce. In this stance, the diaspora remittances have been supporting the CBN. Otherwise, the condition of the dollar would have gotten worse. The CBN has declared that by January, banks must arrange their foreign exchange by whatever means, showing how severe the FX situation may go. And there are chances that the dollar may rise to N1000 by January 2023.


Related Link

SMEDAN: Website

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Ask Nigeria
1 month ago

Over-regulation is affecting Nigeria’s MSMEs – Lack of basic amenities has been a major setback to the country’s MSMEs growth. – Express your point of view.

Last edited 1 month ago by AN-Kenny
theApr
Member
1 month ago

According to the administration, a large number of SMEs are now empowered. Yes, they did so through lending programs, but eventually they developed rules that contributed to the demise of numerous SMEs. The high cost of flour, the insufficient supply of electricity, the inadequate road system, etc. have all led to the demise of a great number of bakeries.

Remi1
Member
1 month ago

Challenges are interrelated. If these products are produced locally, we won’t need to import them and foreign currency pressure will be reduced, other countries are not affected because they produce what they need, therefore we also need to produce what we need and consume what we produce.

Tonerol10
Member
1 month ago

A lot of business in nigeria lack of access to funding, support services, markets, infrastructure, information and adequate technology. Small and medium-sized businesses (SMBs) have struggled greatly with securing funding. What is role of government on this issues, Government show no support to it. The government always claim that they have empower so many MSME which we are not even sure. Government is not trying at all

SarahDiv
Member
1 month ago

Our government have killed so many SMEs through their policies and they have also failed to provide the basic amenities required by a business to survive.

DimOla
Member
1 month ago

There is a great and grievous problem in this country called Nigeria. The government claimed that we have empower so many SMEs. Yes they did through loan schemes but eventually created policies that killed so many of these SMEs. Bakeries are perfect example, the high cost of flour, low electric power supply, poor road networks etc has killed so many of these businesses. The cost of running and maintenance a business in Nigeria is too high.

jdpumping
Member
1 month ago

MSME growth is so important to development of any country,the government need put laws that support the growth of the economy

Adeolastan
Member
1 month ago

The SME business is facing lots and lots of challenges in Nigeria and all the problems facing it development is majorly cause by government uncare altitude and corruption.For SME to develop and take it rightful place in development of the economy, firstly government needs to do their job and make the environment conducive for them to strive.

Nwachukwu Kingsley
Member
1 month ago

They have centralized their financing in the management of larger enterprises to the point where fewer than thirty percent of Nigeria’s population is in possession of more than seventy percent of the country’s funding loans.

Taiwoo
Member
1 month ago

Because these goods are produced in the area, we won’t have to import them, which will relieve some of the strain on the foreign currency market. However, other nations will not be impacted because they will continue to produce what they require.

Hassan Isa
Member
1 month ago

The fact that banks are required to make arrangements for their foreign exchange by any means necessary demonstrates how dire the currency exchange situation may become.

Chibuzor
Member
1 month ago

This has been the case since the beginning in terms of the obstacles that micro, small, and medium-sized enterprises (MSMEs) face, including a lack of access to capital and support services.

Godsewill Ifeanyi
Member
1 month ago

This illustrates that micro, small, and medium-sized enterprises (MSMEs) constitute a key part of Nigeria’s economic sector, and they are directly responsible for the generation of sixty percent of all jobs throughout the country.

Christiana
Member
1 month ago

MSMEs support major industries by producing minor components and adding value to agricultural items, which are then used as raw materials by huge corporations.

Tolaniiii
Member
1 month ago

Small and medium-sized enterprises (MSMEs) play a significant role in Nigeria’s economy and are directly responsible for the generation of 60% of all jobs in the country.

Kazeem1
Member
1 month ago

Producing small components and adding value to agricultural goods, which then become raw materials for major industries, is how micro, small, and medium-sized enterprises (MSMEs) help feed major industries.

Adesanyaj72
Member
1 month ago

In the course of an interview that Ediong Ikpo had with Segun Kuti-George, the most recent person to hold the position of chairman of the Lagos branch of the Nigerian Association of Small-Scale Industrialists, they discussed the difficulties facing microbusinesses.

Bola12
Member
1 month ago

The growth of a country’s economy can be directly attributed to the success of its micro, small, and medium-sized businesses.

Iyanu12345ogg
Member
1 month ago

At the moment, I concure with the proposed and suggest… The needs to produce what we need and consume what we produces.

Last edited 1 month ago by Iyanu12345ogg
Ultra0711
Member
1 month ago

MSMEs are a driving force behind the development of a country’s economy. There is a great need to design a dynamic regulation for them so as to create room for development

Haykaylyon26
Member
1 month ago

It is true, this small business need to improve to that the economy business can grow and also we need to start producing what we need to produce our consumption. If we are producing it, it will not need to be import it from other countries

Abusi
Member
1 month ago

I agree with the headline that over regulation really stiffens out our MSMEs growth. We need to create and make robust laws which will help improve and promote these small business. If this is not done, the the economy won’t grow, because there will not be enough turnover to keep the businesses going.