Albert Folorunsho Albert Folorunsho FCA, FCTI, ADIT. Pedabo Associates Limited 18 th AATWA Annual Conference (Lagos, 2013)

Albert Folorunsho INTRODUCTION 2 SMEs play an important role in a Nation’s economic development 1 SMEs are largest employers of labour in the economy 2 Nigeria needs to support the growth of SMEs as a tool for its overall economic development 3 Major impediments of the SME sector in Nigeria include: Infrastructural decay, Funding problems, Unhealthy competition by MNEs 4 The fortunes of SMEs need to be reversed if the millennium goals are to be achieve 5

Albert Folorunsho INTRODUCTION -Cont’d 3 At the end of the presentation, participants will be more acquainted with: Global definitions of SMEs The roles and significance of SMEs in an economy Problems limiting the success of SMEs with particular reference to Nigeria. The roles accountants play for the SMEs and the opportunities for Accounting Technicians

Albert Folorunsho SMEs Definition / Classification 1 4

Albert Folorunsho SMEs Definition / Classification 5  The UN and OECD have provided general criteria for SME definition; o Turnover o Asset base o Number of employees  Japanese Ministry of Economy, Trade and Industries defines SMEs as follows: Capital Employees Retail & service sector ≤ USD 600,000 <50 Wholesale Sector< USD1.2 Million <100 Manufacturing Sector<USD3.6 Million <300

Albert Folorunsho SMEs Definition / Classification - Cont’d 6  Small Business Administration of USA defines SMEs as businesses that are: o Independently owned and operated o Non-dominant and profit oriented o Classification based on number of employees and sales volume TurnoverB/S o < 50 employees≤ €50 million ≤€43 million

Albert Folorunsho SMEs Definition / Classification - Cont’d 7  Ministry of Economic Affairs – Taiwan  IFC & Multilateral Investment Guarantee Agency (MIGA) o < 50 employees o < $3million total annual sales Paid in capitalSales Rev Manufacturing, Construction, Mining, Quarrying ≤ USD42 million- Agric, forestry, fisheries, water, elect, Gas etc ≤ USD3.03 million

Albert Folorunsho Nigeria 2 8

Albert Folorunsho SME Definition in Nigeria 9 a. CBN under Small & Medium Enterprise Credit Guarantee Scheme(SMECGS) o Asset Base (excluding land) – between N5m & N500m. o Labour force - between 11 and 300 employees b. National Council of industry (2001) - Employee ≤ Asset base ≤ N200 million c. National Policy on SMEs - Micro enterprises - ≤ 10 employee and <45 million asset base - Small Enterprisebetween 10 – 49 employees and between N5m & N50m asset base - Medium Enterprise: From 50 – 199 employees

Albert Folorunsho Roles & Significance of SMEs 10 The following have been said of SMEs: SMEs contributes 50% of GDP …..(OECD). 65% of employment in high income countries are from SMEs. SMEs generate 70% - 90% of employment in middle income countries. Significant impact on the export earnings in developing countries. SMEs enhances entrepreneurship innovation and invention

Albert Folorunsho Roles & Significance of SMEs - Cont’d 11 SMEs drive technology change and growth in productivity Catalyst to private sector development According to IFC, 96% of business in Nigeria fall under SMEs 90% of manufacturing and industrial sector in numbers fall under SMEs.

Albert Folorunsho Problems Limiting the Success of SMEs in Nigeria 12 Deficient public infrastructure Bureaucratic bottlenecks & inefficiency in the administration of incentives Lack of easy access to funds Discrimination by banks, due to credit risk High cost of packaging appropriate business proposals Uneven competition and preference for imported products Dependence on imported raw materials – foreign exchange risks Low and dwindling consumer purchasing power resulting in low demand for local products Dumping & importation of substandard products

Albert Folorunsho Problems Limiting the Success of SMEs in Nigeria – Cont’d 13 Inadequate educational & technical background. Weakness in organization, marketing, personnel, accounting records and information usage, processing & retrieval. Multiplicity of regulatory agencies & taxes, increasing high cost of doing business. Absence of long term finance. Poor intellectual capital resources Lack of appropriate & adequate managerial & entrepreneur skills Inadequate training & leadership development

Albert Folorunsho Agencies set up to support SMEs 14 Small & Medium enterprises credit Guarantee Scheme (SMECGS) of CBN. Small & Medium Industries Equity Investment Scheme (SMIEIS) of CBN. Family Economic Advancement Program (FEAP) Industrial Development and Coordinating Centre. National Directorate of Employment Nigerian Bank for Commerce & Industries (NBCI)

Albert Folorunsho Agencies set up to support SMEs – Cont’d 15 Nigerian Industrial Development Bank (NIDB) National Economic Reconstruction Fund (NERFUND) The African Development Bank / Export Stimulation Loan (ADB/ESL) Nigerian Export Import Bank Microfinance Banks Bank of Industry (BOI) Small & Medium enterprises Development Agency of Nigeria (SMEDAN).

Albert Folorunsho Major Areas Identified for Development to boost SMEs 16 Institutional, Legal & Regulatory framework. Human Resource Development. Technology, Research & Development. Extension & Support Services Marketing Infrastructure Finance.

Albert Folorunsho Other Steps to boost SMEs Growth 17 Nigerian Investment Promotion Commission (NIPC). Nigerian Export Promotion Commission (NEPE) The Industrial Development Act. Nigerian Content Development Act. Private Sector participation in Power, Tourism, Manufacturing and Export. Solid Mineral Mining etc.

Albert Folorunsho The Roles of the Accountant 3 18

Albert Folorunsho The Roles of the Accountant 19 Accountability and Planning. Feasibility Report. Business Plan Preparation. Financial Modeling. Accounting Services & Book Keeping. Tax Management Services. IT Services. Audit & Assurance Services. Asset Verification & Certification.

Albert Folorunsho Competence Areas for the Accounting Technicians 20 Budget Preparation Cashflow forecasting Basic Accounting functions  Analysis of payables & receivables  Bank Reconciliation  Petty cash management functions  General Ledger entry. Tax Compliance functions Payroll management functions Preparation of management accounts. Basic internal control functions

Albert Folorunsho Opportunities for and place of the Accounting Technicians. 21 Employment opportunities As accounts officers in SMEs. Outsourcing materials for big/medium size firm. Direct contract services for SMEs. Assist SMEs to be complaint with IFRS effective from Ample opportunity to diversify from Accounting Profession to several lines of business under the SMEs schemes.

Albert Folorunsho Thank You 4 22