By Our Correspondent
A recent World Bank report says 600 million jobs are needed in the next fifteen years to absorb a growing global global workforce. Four out of five new formal positions in emerging economies like Nigeria, says the report, is created by small and medium scale enterprises (SMEs), yet more than 50% of SMEs lack access to finance, which hinders their growth. In Nigeria, the fail rate of SMEs remain exceedingly high, despite reported governmental interventions.
Domesticating the issue, a frontline gubernatorial aspirant in the forthcoming election in Anambra State, Oseloka H. Obaze, said there must be concrete policy support from government, both at the national and subnational levels, if SMEs are to prosper. He noted that SMEs are of utmost importance in the growth and development of a nation’s economy.
Obaze made these remarks during an interactive Citizen’s Forum programme held in Onitsha over the weekend. He said SMEs, which are business enterprises whose total cost, excluding land, is not more than two million naira with paid employment of up to fifty persons, contribute 55% of the GDP and 65% of employment.
Obaze, however, regretted what he termed “an alarming figure of the fail rate of SMEs in Nigeria being as high as 75%.” According to him, such business failure is mind boggling. He said the Nigeria economy suffers immeasurably when the fail rate of SMEs is high because of the vital contributions the enterprises make.
Affirming the validity of result of a recent Entrepreneurs Club survey, Obaze noted that the top three challenges facing SMEs in Nigeria are; insufficient access to finance, unstable power supply and economic instability.
He said the difficulties people with bright business ideas have in securing finance, either through loans or investments, is equally discouraging.
Obaze advised small and medium entrepreneurs to enter into partnerships, pool resources together and also enlist the help of faith-based micro finance institutions, which according to him, are far more disposed to offering single digit interest loans to startups than commercial banks.
He frowned at the abuse of intellectual property and its negative impact on SMEs. He said it’s disheartening when small investors who share their business plans and feasibility studies with prospective finance institutions get exploited. He called on the government to set up a system that protects entrepreneurs from such abuses and also focus on how best to help SMEs capitalize.
On the issue of power, Obaze lamented the epileptic supply of power and the suffocating estimated billing of electric consumption. Even as he called on the government to urgently intervene, he advised SMEs to look for alternative sources of energy. “Rather than spend all your money on fuel for electric power generators. Perhaps SMES should look at cost efficient solar systems for power supply plus whatever they get from the national grid.”
On the instability of the economy, Obaze said the problem is is national. He continued his advocacy that the government ends the two-tier forex regime as the first step to a level playing field for SMEs and others.
Continuing, Obaze said, “But the reality is that SMEs don’t fail on account of poor finances or lack of credit facilities alone. I can easily enumerate a dozen factors, why SMES fail, including poor access to credit, inadequate capitalization, poor financial planning and review; poor market segmentation and/or strategy, lack of market knowledge, poor strategic vision, absence of a standard-quality programme; and underestimating the competitors. These fail factors are all prevalent in Nigeria. But policymakers can help in reducing existing redundancies; the COTs being charged by our banks are killing.
“Government’s role is to regulate; be it big or small business. But regulation also comes with incentives and capacity building measures. A government that is focussed only on collecting taxes from corporations has got it wrong. Government must speculate to accumulate.” Obaze remarked.
Mr. Obaze is the former Secretary to the State Government of Anambra State, Nigeria from 2012 to 2015 - MD & CEO, Oseloka H. Obaze. Mr. Obaze also served as a former United Nations official, from 1991-2012, and as a former member of the Nigerian Diplomatic Service, from 1982-1991.
Selonnes Consult Ltd. is a Strategic Policy, Good Governance and Management Consulting Firm, founded by Mr. Oseloka H. Obaze who served as Secretary to Anambra State Government from 2012-2015; a United Nations official from 1991-2012 and a Nigerian Foreign Service Officer from 1982-1991.