SMEDAN: SERVICES AND POLICIES FOR

SUPPORTING MSMEs IN NIGERIA

A Paper Delivered By

MUHAMMAD NADADA UMARDIRECTOR GENERAL/CEO

SMALL AND MEDIUM ENTERPRISES DEVELOPMENT AGENCY OF NIGERIA (SMEDAN)

17th JUNE, 2010

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OUTLINE OF PRESENTATIONIntroductionMSMEs: Their RelevanceChallenges Facing MSMEsOvercoming the ChallengesOpportunitiesThe Role of GovernmentAvailable Services for MSME DevelopmentSMEDAN MSME Development CycleNational MSME Policy thrustWay ForwardConclusion

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INTRODUCTIONMicro, 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.

INTRODUCTION Cont’d

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

MSMEs: Their RelevanceIn 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

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Category Employees Assets (N’m) 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

MSMEs: Their Relevance Cont’d

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 Cont’d

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 CONT’DLack 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 CONT’DIndividual/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 CONT’D

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 R&D, ICT & E- commerce

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OVERCOMING THE CHALLENGESValue re-orientation – instilling the right attitudePromotion of entrepreneurship educationPromotion of well being (confidence & enthusiasm for work and learning)Improved social-economic infrastructure

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OVERCOMING THE CHALLENGES Cont’d

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 SMEDANImproved funding windows (ie BOI, NERFUND, MFIs, NACRDB, etc.

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OPPORTUNITIESResource EndowmentsPopulation (vast internal market)Stable Democratic EnvironmentResilienceDeepening Supportive Economic ReformsIncreased AwarenessImproving Human CapitalImproved Technology

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The Role of GovernmentIn 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 Cont’d

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

Available Services….. Cont’d

4. Training of Trainers

5. Counseling

6. Mentoring

7. Establishment of Credible Database for MSMEs in Nigeria.

8. Promotion of networking/cluster formation.

Available Services…… Cont’d

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

SMEDAN’S MSME DEVELOPMENT CYCLE

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3. Training (vocational/entrepreneurshi

p)

2. Needs Assessment

1. Sensitization

4. Facilitation (access to critical resources eg finance, workspace, etc)

5. Start-up

6. Monitoring and

Evaluation

7. Planning for additional Interventions based on M&E report

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 Cont’d

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 FORWARDRenewed 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 Cont’dPump more funds into infrastructure

development through PPP and ensure value for money.Continue the onslaught on corruptionDeepening and broadening the activities Business Development Services (BDS).Provision of workspaces and common facility centres.

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WAY FORWARD Cont’d

More AdvocacyEstablishment of SMEDEFEstablishment of MSME BankRepatriation of Diaspora Funds to finance MSMEs.Review of operational Guidelines of MFIs.Provision of Take off Grants to MFIs.

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CONCLUSIONIn 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.

Conclusion Cont’d

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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THANK YOU FOR LISTENING