SMEDAN: SERVICES AND POLICIES FOR SUPPORTING MSMEs IN NIGERIA

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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

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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

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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.

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INTRODUCTION Contd

• 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

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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 (Nm) 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
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MSMEs Their Relevance Contd

• 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

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MSMEs Their Relevance Contd

• 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.

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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.

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CHALLENGES CONTD

• 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

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CHALLENGES CONTD

• 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

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CHALLENGES CONTD

• 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 RD, ICT
  E- commerce

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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

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OVERCOMING THE CHALLENGES Contd

• 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.

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OPPORTUNITIES

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

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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

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The Role of Government Contd

• 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.

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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

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Available Services.. Contd

• 4. Training of Trainers
• 5. Counseling
• 6. Mentoring
• 7. Establishment of Credible Database for MSMEs
  in Nigeria.
• 8. Promotion of networking/cluster formation.

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Available Services Contd

• 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

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SMEDANS MSME DEVELOPMENT CYCLE
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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

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National MSME Policy Thrust for MSME Development
Contd

• 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

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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.

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WAY FORWARD Contd

• 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.

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WAY FORWARD Contd

• 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.

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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.

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Conclusion Contd

• 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

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