The challenges of Small and Medium Enterprises (SMEs) in Nigeria
Small and Medium Enterprises (SMEs) in Nigeria has not performed very well. They have contributed just a small percentage of the GDP unlike the other emerging economies in the world.
The challenges being faced by our own SMEs are very many. These challenges have been responsible for the slow growth of SMEs in Nigeria.
Some of the major challenges include:
1. Poor managerial skills
From interaction with most SMEs especially the one-man business owners, the common problem is poor leadership. One main reason for this is lack of training and poor capacity building. Most people go into businesses without adequate knowledge or entrepreneurial skills on how to run businesses.
The reason our brothers from the eastern part of the country are successful entrepreneurs is because they don’t joke with apprenticeship through which they acquire managerial skills. The apprenticeship scheme for an average Igbo boy takes between 5 to 7 years and in some cases even more. During this period, the person would have gathered enough experience in the line of business he wants to pursue.
That is why the recent government initiatives on Capacity building through the various platforms such as BIG/GEM of the Federal Ministry of Trade and Investment and Youwin Connect of the Federal Ministry of Finance must be commendable. These trainings are very key for government to achieve the objectives of the various grants that will be disbursed under the schemes.
2. Poor or inadequate infrastructure
The poor state of infrastructure in the country has been a major obstacle to the growth of SMEs. Only few entrepreneurs can survive without power. The epileptic or irregular power supply has contributed significantly to the high cost of doing businesses in the country.
Apart from power, lack of good access roads and other social amenities have also hindered the growth of SMEs.
3. Lack of access to funds
Most SMEs find it difficult to access funds or capital. Most Nigerian banks don’t support start-ups and even existing businesses don’t have the required collateral.
For SMEs that go to non-conventional banks, the high interest rate is always a burden.
The issue funding or finance, therefore, is a major challenge for SMEs in Nigeria.
The various governments have helped a lot in addressing this issue. Some of the measures include various grants by Federal Government, low interest loan from BOI and Bank of Agriculture, CBN SMEs Initiatives through the banks. Lagos State is also trying through the Lagos State Entrepreneurial Trust Fund (LETF). All other states should emulate this initiative of Lagos State Government that has assisted over 3,000 businesses.
4. Unfair competition
Most SMEs in Nigeria cannot compete with items or products from other countries especially China and other Asian tigers. The government has also not helped in this area because of dumping of fake and sub-standard goods, and smuggling activities in the country. When combined with the high cost of production in the country, locally made goods can hardly compete in the area of pricing.
Another challenge faced by SMEs is bureaucratic bottle neck of various government agencies like CAC, NAFDAC, and Customs etc.
For instance, getting NAFDAC approval for food item or drug can take years. In most cases you spend 5 times the official price to facilitate the approval.
You can spend as high as N250,000 to get NAFDAC approval for just one product even after meeting all the specified requirements.
Even with the recent government initiatives on ease of doing business, a lot still need to be done to address this issue.
5. Low Demand
In Nigeria, there is still preference for imported goods over locally made goods. Even government agencies and departments do not patronize our own SMEs. All these combined create marketing problems for SMEs in Nigeria. No wonder many of them closed down within the first few years of operation. No business can survive in the long run without enough sales to cover operational costs.
6. Multiple Taxes and Levies
SMEs are subject to so many taxes and levies from local government to federal government. So many agents are involved in the collection of taxes and levies. This has given room for unauthorized levies and taxes. The impact of this on the operational costs of SMEs cannot be overemphasized.
Government needs to streamline these taxes to help SMEs.