SMEDAN: SERVICES AND POLICIES FOR SUPPORTING MSMEs IN NIGERIA A Paper Delivered By MUHAMMAD NADADA UMAR DIRECTOR GENERAL/CEO SMALL AND MEDIUM ENTERPRISES DEVELOPMENT AGENCY OF NIGERIA (SMEDAN) 17th JUNE, 2010

OUTLINE OF PRESENTATION Introduction MSMEs: Their Relevance Challenges Facing MSMEs Overcoming the Challenges Opportunities The Role of Government Available Services for MSME Development SMEDAN MSME Development Cycle National MSME Policy thrust Way Forward Conclusion Prepared By SMEDAN

INTRODUCTION Micro, small and medium enterprises (MSMEs) are the bedrock of development of any economy. Statistically, MSMEs constitute more than 75% of all enterprises in Nigeria. This is mainly due to ease in terms of set up capital and human resource required to establish an MSME. These reasons together make, MSMEs a veritable group for socio-economic development of any serious nation. Prepared By SMEDAN

INTRODUCTION Cont’d The ability of MSMEs to quickly adapt to changing circumstances, along with their potential to innovate, have given them a critical edge in the market place. The growth of the MSME sub-sector of the economy is critical to the nations economic recovery, growth and the attainment of ‘the much talked about’ vision of becoming one of the twenty largest economies by year 2020

MSMEs: Their Relevance In accordance with the National Policy on MSMEs, micro, small and medium enterprises are classified as follows: NB: Where there is an inconsistency between employment and asset base, employment criterion will prevail. SOURCE: National Policy on MSMEs Category Employees Assets (N’m) Excluding Land and Building Micro Less than 10 Less than 5m Small 10-49 5m-Less than 50m Medium 50-199 50m-Less than 500m Prepared By SMEDAN

MSMEs: Their Relevance Cont’d The relevance of MSMEs has been recognized the world over. These include among others: Employment generation Supply of potential entrepreneurs Ensuring sound competition Mobilization of local resources Prepared By SMEDAN

MSMEs: Their Relevance Cont’d Creation of new industries Mitigation of rural-urban migration Income generation and poverty alleviation Enabling adaptive technology and skill acquisition Production of intermediate products for uses by large enterprises. Prepared By SMEDAN

CHALLENGES FACING MSMES IN NIGERIA MSMEs in Nigeria are confronted with very unfavorable business environment. Certain peculiar challenges have continued to militate against their optimal performance. Some of the external challenges include: - Poor state of infrastructure - Weak access to production inputs especially finance - Corruption. Prepared By SMEDAN

CHALLENGES CONT’D Lack of trust by Nigerians in Nigerians - Multiplicity of Taxes and levies plus red tapism. - Poor access to appropriate and affordable workspace - Low access to information. - Low synergy between various tiers of government. - Inappropriate/crude technology - Dearth of business information/databank Prepared By SMEDAN

CHALLENGES CONT’D Individual/internal factors also contribute to the problems of MSMEs. Such factors among others include: - Aversion to joint ownership - Family ties, i.e. bringing family into business - Financial mismanagement - Lack of basic business capacity (knowledge, skills & attitude) - Non-recruitment of qualified personnel Prepared By SMEDAN

CHALLENGES CONT’D Lack of perseverance and staying power when the business is going through tough times. - Poor record keeping especially accounting books - Lack of standardization of products - Being the all-in-all, i.e. managing director, accountant, cashier, admin. Manager, etc - Low capacity to invest in R&D, ICT & E- commerce Prepared By SMEDAN

OVERCOMING THE CHALLENGES Value re-orientation – instilling the right attitude Promotion of entrepreneurship education Promotion of well being (confidence & enthusiasm for work and learning) Improved social-economic infrastructure Prepared By SMEDAN

OVERCOMING THE CHALLENGES Cont’d Improved access to productive resources such as information, workspace, finance etc. Economic reforms with emphasis on job creation, enhanced economic opportunities and access to them. Establishment of SMEDAN Improved funding windows (ie BOI, NERFUND, MFIs, NACRDB, etc. Prepared By SMEDAN

OPPORTUNITIES Resource Endowments Population (vast internal market) Stable Democratic Environment Resilience Deepening Supportive Economic Reforms Increased Awareness Improving Human Capital Improved Technology Prepared By SMEDAN

The Role of Government In recognition of the need to establish MSMEs as the driving force for economic growth, government instituted the following programmes to address key challenges plaguing the sector: Setting up of the Bank of Industry (BOI) National Economic Reconstruction Fund (NERFUND) NACRDB NAPEP NDE Enabling environment for the establishment of Microfinance banks SMEDAN Prepared By SMEDAN

The Role of Government Cont’d SMEDAN was particularly established to facilitate the growth and development of MSMEs. In doing this the Agency leverages on the competences of other stakeholders both in the private and public sectors of the economy. Prepared By SMEDAN

Available Services for MSMEs Development The Agency is mandated to among other things; champion the emergence of a structured and efficient MSME sub-sector. Specifically, the Agency provides the following: 1. Information provision and awareness creation/business sensitization. 2. Business Development Service (BDS), embracing training, counseling and mentoring. 3. Entrepreneurship Training

Available Services….. Cont’d 4. Training of Trainers 5. Counseling 6. Mentoring 7. Establishment of Credible Database for MSMEs in Nigeria. 8. Promotion of networking/cluster formation.

Available Services…… Cont’d 9. Advocacy and improvement in operating environment, usually in partnership with others (private-public, public-public). 10. Promotion of linkages and access of MSMEs to vital resources, especially finance and workspace. 11.Establishment of Sub-contracting and Partnership Exchange (SPX) in conjunction with UNIDO. 12.Policy formulation

SMEDAN’S MSME DEVELOPMENT CYCLE Prepared By SMEDAN

National MSME Policy Thrust for MSME Development SMEDAN in collaboration with UNDP formulated the first ever National Policy on MSMEs in 2007. The Policy identifies the following priority areas for development: Micro food processing Cottage Arts and crafts Textiles and clothing Wood processing and furniture Leather and leather products Basic metal, metal fabrication and engineering enterprises Solid mineral enterprises Electronic and Information Technology services Building and construction enterprises Oil and gas Entertainment Prepared By SMEDAN

National MSME Policy Thrust for MSME Development Cont’d As a vehicle for implementation of the policy, a National Consultative Committee drives implementation of the policy at the national level (with the Agency as the secretariat) While State Consultative committees are established at state-level to for implementation of the key principles of the policy Prepared By SMEDAN

WAY FORWARD Renewed commitment by all tiers of government to drive the overall development of the MSMEs sub-sector in Nigeria. Establishment of the National Credit Guarantee Scheme for MSMEs to create an effective access to finance for MSMEs. Re-equip and strengthen SMEDAN for enhanced operational performance. Prepared By SMEDAN

WAY FORWARD Cont’d Pump more funds into infrastructure development through PPP and ensure value for money. Continue the onslaught on corruption Deepening and broadening the activities Business Development Services (BDS). Provision of workspaces and common facility centres. Prepared By SMEDAN

WAY FORWARD Cont’d More Advocacy Establishment of SMEDEF Establishment of MSME Bank Repatriation of Diaspora Funds to finance MSMEs. Review of operational Guidelines of MFIs. Provision of Take off Grants to MFIs.

CONCLUSION In conclusion, there is significant evidence to show that lack of appropriate intellectual property protection framework (in terms of laws and enforcement mechanisms) stunts creativity and innovation. And for those that are bold enough to go ahead with their ideas and make them a reality, they are denied the benefits accruing from their innovation and creativity. The growth of MSMEs on one hand and the economy in particular bears the brunt of such weak regulatory regime. Prepared By SMEDAN

Conclusion Cont’d For the nation to be among the 20 most economically advanced in the world by the year 2020, more attention must be paid to the development of MSMEs. SMEDAN will continue to support the innovation and creativity in the development of the MSME sub-sector for sustainable economic growth Prepared By SMEDAN

THANK YOU FOR LISTENING Prepared By SMEDAN