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Circumventing the Nigerian SMEs Challenges


SMEs are enterprises with a maximum asset base of N500million, excluding land and working capital, and a staff strength of not less than 10 and not more than 100 workers. SMEs in Nigeria is supposed to operate legally to regulate their operations. But street traders are within their fold with hawkers and small/medium scale enterprises operating in their enclaves. Medium-scale enterprises, on the other hand, operate with a total capital base of over N50 million and not more than N500 million, including working capital as well, but less land cost, than, a labor size of 101–300 workers. SMEs are a major contributor to the growth and development of the developed economies, proving to be a potent force for economic emancipation and growth. Worldwide, their survival is usually the after effect of how an economy maximizes them, with their inputs, depending largely on an enabling and prevailing environment, varying from available legislative rules to essential structural services, including the provisions of the legal system ability of necessary infrastructure, tax incentives, and business-friendly regulatory means. Essentially the result of why SMEs in Nigeria is largely in a quandary, they lack in all respects, from a good transportation network, power supply, strong telecommunication network, and an enhanced structure to credible policies and credit facilities. But even at that, they are no complete failure. They are over 80 percent of the business sector, contributing well to the national Gross Domestic Product (GDP). In the estimation of the Nigeria Bureau of Statistics (NBS), their contribution to the national GDP is about 48 percent, accounting for 96 percent of businesses and 84 percent of employment. That aggregately being about 17.4 million, they account for about 50 percent of industrial jobs and nearly 90 percent of the manufacturing sector in terms of their numbers. By a 2010 Survey report on SMEs in Nigeria conducted by the NBS in collaboration with SMEDAN, the SME sector in Nigeria is strategically positioned to absorb up to 80 percent of jobs, improve per capita income, increase value addition to raw materials supply, improve export earnings, enhance capacity utilization in key industries and unlock economic expansion and GDP growth. But economic shocks continue to make their failure rate extremely high. Over 50 percent, on average, of new entrants end up falling from such issues as legal breaches of their statutory obligations, particularly as the government was less enthusiastic about the SMEs until the 1990s when it began to give good support as against the larger businesses it supported better before then. The government came up with enhanced SMEs’ support measures in 1990 targeted at developing and promoting them, but even at that, they continue to suffer unquantifiable challenges, inhibiting their growth and economic prospects. Funding and seamless access to finance are no child’s play, just as they lack management skills due to inadequate training and good education. Similarly, virile legal support to give them the needed confidence for effective practice is absent, remaining in challenges that many are unable to overcome. Evading the Many Challenges The challenges are legion, proving difficult for many businesses to evade and attain their full potential. Nigeria ranks 131 out of 189 countries, according to a World Bank report, on the ease of doing business, opening 80percent of new small businesses to failure within three years of existence. Business owners are not equipped enough for the challenges in front; making a lot of them completely give up or become stagnant without again ever experiencing any improvement. 6 Common Challenges Affecting SMEs in Nigeria
  1. Access to Finance
The nation’s financial inclusion drive is still in abeyance, and small business owners remain in difficulty getting access to finance to start or scale their businesses. And with a greater percentage of our population, almost 40percent of households and adults, still remaining unbanked, access to funding remains herculean. Added to that, many Nigerian small business owners do not keep proper records of their business activities with which financial institutions evaluate creditworthiness and suitability for financial support. It becomes more than appropriate that first, small business owners operate personal and business accounts for easy identification with them by banks, and secondly, keep proper accounting records of business operations to enhance access to funding. On the whole, it’s advisory that small business owners seek out financing from online lenders as it’s easier to do so than from banks and other financial institutions, requiring that they simply check their eligibility within minutes.
  1. Poor Business knowledge
A lot of small business owners in Nigeria go into the business space by chance with little or zero knowledge of business management. Lack of adequate knowledge of business management is a great undoing of the average small business owner in Nigeria. They run businesses without structure or adherence to industry best practices and operate with people lacking in management skills that are highly demotivated and care less about the business’ success. It’s essential that small business owners invest in learning the dynamics of their trade, and basic business management skills, including accounting, leadership, customer relations, government relations, marketing, and branding. Enhanced knowledge gives businesses an edge in a highly competitive environment.
  1. Effects of Government Regulations and Policies
Some Government regulations and policies could be responsible for the challenges of small business owners. The bureaucratic nature of procuring necessary certificates, licenses, registrations, and other permits needed to run businesses could be too tedious, just as the different levies of agencies of government targeted small business owners. Though the regulations and levies are put in place to maintain and ensure order in the business space, they have become too much for small business owners. Some other harsh macroeconomic conditions such as unstable exchange rate, inflation, and hike in fuel prices are also contributing factors to the many frequent challenges of small business owners, requiring that government does more to provide a more conducive macro-economic environment and simplify the process of acquiring licenses and certifications to encourage the growth of small businesses.
  1. Market Invisibility
Reaching the critical mass of a targeted market is difficult as a lot of the brick and mortar businesses are located in one corner of the market without reaching their full sales potential. They remain entangled in poor sales, low revenue, and stunted business growth giving small business owners a lot to worry about. It is better, therefore, for small business owners to invest more in platforms and digital solutions that would help get their products or services to be more visible to their target market. Business owners could take advantage of the e-commerce platforms to increase their sales, and also the digital marketing tools, including websites and social media channels to enhance their visibility and increase sales and revenue.
  1. Poor Public Infrastructure
The poor state of public infrastructure in Nigeria is agonizing and posing a serious threat to the growth and development of SMEs. It ranges from inadequate power supply to poor transportation infrastructure, insecurity, and inaccessibility to potable water. But of the many challenges, business owners are most afflicted by the irregular power supply, hindering the growth of small businesses, particularly those in manufacturing and production, and killing a lot of industries, mini-factories, and other businesses. Many business owners have taken to providing themselves with alternative infrastructures but the cost of providing such parallel support for their businesses is higher, entailing higher operational expenses. Some commercial banks have imbibed the thought that the challenges have made SME financing a high venture for them, and make their funding unattractive and access to financing by SMEs from the banks more difficult. Infrastructural development, especially in underserved regions by the government ought to gain more attention while small business owners should as a matter of priority, pending when government rises to the occasion, provide necessary infrastructures as part of their production cost. It’s necessary to take the bull by the horn and salvage your business.
  1. Engaging eligible staff
It’s a major challenge to find the right people to work with business owners, making many small businesses fail because of the incompetence of those managing or supporting the owner. With many people having the wrong attitude toward work, it’s always difficult finding people with the right attitude to work or learn in the process. Businesses confidently navigate through hard times and emerge strong with the right people. An HR expert is best for a small business to help with staffing or alternatively explore productivity tools instead of employing people. Productivity tools are efficient and dependable and there are a number of them that can help small businesses across different tasks. Entrepreneurs develop and build the economy of a place, meaning more people need to go into entrepreneurship to create small businesses that could contribute positively to the collective economic growth of a Nation. Small business owners need to confront the challenges and get used to rewriting the statistics of failure that have beleaguered them in Nigeria, including taking on advisors or consultants that could mitigate or find appropriate solutions to take them off the cliff. The Good of Consultants for Small Businesses Consultants have the capability of helping businesses to improve performance and make necessary changes to achieve success, no matter the challenge. Doing this bothers on helping businesses to overcome challenges, increase revenue and grow. It requires working with consultants of experience and previous success with companies of yours as the SSAC Advisory and Professionals, having at the back of your mind that running a small or midsize business is challenging because of the sheer number of tasks it takes to succeed. From accounting to human resources to technical support, it’s almost impossible for business owners to do it all themselves. But with a consulting firm like SSAC, they don’t have to figure out everything on their own. SSAC provides management consulting to help organizations improve their performance and efficiency, analyzing businesses and creating solutions to help companies meet their goals, being a Value for Money Catalyst and change in businesses, which it has sustained for over 36 solid years in operation. Its SME-focused support services vary from company registration with the Corporate Affairs Commission (CAC), advising on company formation and guidance on appropriate management structures; doing feasibility studies and business plans; facilitating start-up capitals, streamlining strategic re-organizations, registration with relevant tax and regulatory authorities, nurturing compliance; guidance on tax management, and filing of statutory returns; accounting manuals and procedural guide, including internal controls; bookkeeping; providing financial and management advice to project and human capital development with its experienced SME dedicated team rendering assistance to various SMEs on the listed areas. The SSAC team as well supports SMEs in the use of new technologies, particularly in their core areas of operation, including operating accounting and reporting to grow their businesses. Further to that, the firm provides expertise in a specific market, identifying problems, supplementing existing stages, initiating change, providing objectivity, teaching, and training employees, and doing the “dirty work,” such as laying off staff, reviving an organization, creating new businesses and influencing other people, including lobbyists. SSAC has a visionary outlook, long-term goals related to your business, and a role to make your business reach the next stage and make it great.


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