1. Industrial Cluster Development A viable Strategy for MSME Development
A Presentation by Engr. Adeniyi Ogunsanya MNSE
National Vice President, NACCIMA
Chairman, NACCIMA MSME Trade Group
At the NACCIMA MSME Breakfast Meeting
Thursday, 25th October 2018
NACCIMA House, 8A Oba Akinjobi Way, GRA Ikeja, Lagos

2. A RECAP ON THE NIGERIAN ECONOMY: Recession
After more than a decade of economic growth, the sharp and continuous decline in crude oil prices since mid-2014, along with a failure to diversify the sources of revenue and foreign exchange in the economy, led to a recession in the second quarter of 2016.

3. A RECAP ON THE NIGERIAN ECONOMY: Recovery
In response, the Federal Government’s launch of the Economic Recovery and Growth Plan (ERGP), a Medium Term Expenditure Plan covering the period 2017 – This plan signaled the government’s intention to collaborate closely with the private sector and deepen their investment in agriculture, power, manufacturing, solid minerals and services sectors.

4. ERGP 2017-2020 targets for MSMEs
• To provide dedicated infrastructure and common facilities to MSME clusters • To provide incentives to support industrial hubs • Review local fiscal and regulatory incentives to support the development of industrial cities, parks and clusters, especially around existing ports and transport corridors • Extend infrastructure tax relief to collectives to attract clusters of corporate entities • Establish Special Economic Zones (SEZs) to provide dedicated infrastructure to support hub productivity

5. Comparative Statistics on Nigerian MSMEs
Country
Employment (%)
Export Earnings (%)
GDP Level (%) UK 53 27 52
USA 30 50
India 79 38 40
Honk-Kong 78 37 51
Japan 70 68
Nigeria 84 7 48
Statistics from the International Centre for Entrepreneurship and Career Development (ICECD) and the Nigeria Bureau of Statistics (NBS)

6. Internal and External Challenges faced by Nigerian MSMEs
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
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
Low capacity to invest in R&D, ICT & E-commerce
Inadequate linkage to local & international supply chains
Limited access to markets.
Lack of exit/succession plan.
Declining business etiquette & disregard for contract sanctities.
Poor state of infrastructure
Weak access to production inputs (such as finance, workspace) & product markets etc.
Multiplicity of Taxes and levies plus red tape
Low access to information

7. The NACCIMA MSME Trade Group
The MSME Trade Group is a sectoral group in NACCIMA tasked with:
Assisting the Federal Government through NACCIMA in articulating industrial and SME policy guidelines on an on-going basis
Sensitizing and raising the level of awareness in MSMEs on government policies and initiatives
Promoting cooperation between members and regulatory institutions

8. The Industrial Cluster Development Programme
The NACCIMA MSME Trade Group is embarking an Industrial Clusters development programme to support government initiatives and resolve the challenges faced by MSMEs by promoting Industrial Clusters based on Public-Private-Partnerships.

9. The Industrial Cluster Development Programme
Industrial Clusters are agglomerations of interconnected companies and associated institutions. Firms in a cluster produce similar or related goods or services and are supported by a range of dedicated institutions located in spatial proximity, such as business associations or training and technical assistance providers.

10. The Industrial Cluster Development Programme
The cluster approach of development can be a good strategy to acquire competitiveness. Clusters reflect the systemic character of modern innovation and interactive innovation processes. Interactions between actors in clusters are based on trade linkages, innovation linkages, knowledge flows in various forms or the sharing of a common knowledge base or factor conditions.

11. The Industrial Cluster Development Programme
SMEs operating in such clusters derive a clear competitive advantage from:
the proximity to sources of raw inputs,
the availability of suitably customized business development services,
the abundance of clients attracted by the cluster tradition in that industry, and
the presence of a skilled labour force.

12. The Industrial Cluster Development Programme
Clustering brings a variety of benefits to firms and the local economy as follows:
Clusters increase levels of local expertise. This provides sourcing companies with a greater depth to their supply chain and allows for the potential of inter-firm learning and co-operation.
Clusters give firms the ability to draw together complementary skills in order to bid for large contracts that as individual units they would be unable to successfully compete.
Clusters allow for potential economies of scale to be realized by further specializing production within each firm, by joint purchasing of common raw materials to attract bulk discounts or by joint marketing.

13. The Industrial Cluster Development Programme
Clusters strengthen social and other informal links, leading to the creation of new ideas and new businesses.
Clusters improve information flows within industries. For example, clusters may enable finance providers to judge who the good entrepreneurs are and business people to find who provides good support services.
Clusters allow for the development of an infrastructure of professional, legal, financial and other specialist services.

14. The Industrial Cluster Development Programme
In the coming months, the NACCIMA MSME Trade Group will be organizing a workshop (as a follow up to this breakfast meeting) to devise a viable strategy for developing industrial clusters/parks. This is will help NACCIMA develop a stakeholder map and determine the gaps that exist in the promotion of industrial clusters.

15. A call to Stakeholders in the MSME Sector
To establish the roles they are willing to play in the development of Industrial Clusters, and the conditions under which they will play these roles

16. Thank you