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.
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