Nigerian SME’s need more than finance

March 30, 2015

This week Nigeria’s President Goodluck Jonathan launched the country’s first Development Bank. Despite having a number of infrastructural projects in the pipeline and very little funds reserved for capital expenditure in 2015, the lender has been handed a mandate of promoting the expansion of Micro, Small and Medium Enterprises (MSME) within the West African economic powerhouse.

Although this may help spur much needed growth within a sector critical to Nigeria’s progress, the country may be ill-prepared such an industrial leap. Africa’s small enterprises, from trading to farming, are constrained by limited access to stable energy services, effective transportation, business management programmes and skilled labour, despite contributing more than 80 percent of output and jobs in most of its nations.

Nigeria, Africa’s largest economy, produces less than a quarter of what South Africa generates despite housing almost three times the population. It takes an average farmer in Benue about 48 hours to move a truckload of oranges to Warri, a city in the oil-rich Delta State. However, in the past five years programmes such as the Tony Elumelu Entrepreneurship programme and Ashish Thakkar’s Mara Mentor have offered mentorship to entrepreneurs.

Elumelu recently described small and medium scale enterprises (SMEs) as the engine of growth in any economy because of their ability to create employment. He also stressed that these types of businesses need an enabling environment to attain their full potentials.

The new bank is rightly placed to begin the process. It will help close the funding gap by allocating over 200,000 new loans to micro, small and medium enterprises, generating over one million jobs within the first five years. Starting with a capital base of $1.5 billion (about N300 billion), the Federal Government has projected an increase to $5 billion (about N1 trillion) of funds available to SMEs. Increasing to N2 trillion within the next 10 years, a significant amount compared to what is presently available.

Nigeria may have taken the right step in providing finance, but that alone cannot stir up needed growth that will transcend into better living conditions for a significant segment of its burgeoning population.

Source: Ventures Africa

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