3 weeks ago
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In this interview with ANOZIE EGOLE, the Director-General and Chief Executive Officer of the Small and Medium Enterprises Development Agency of Nigeria, Charles Odii, speaks on the challenges in Nigeria’s SME sector and the way forward
What’s the significant challenge in the Small and Medium Enterprises sector and what are the growth opportunities in this space?
The formalisation of businesses remains a significant challenge as it affects the ability of SMEs to access other opportunities. Take access to finance, for example, which remains scarce and poses a significant challenge to small businesses in Nigeria. We have begun to address this at SMEDAN by engaging financial institutions and other government organisations to mobilise and create dedicated funding for small businesses in Nigeria. We have a partnership with a commercial bank, Sterling Bank, to provide N5bn in single-digit interest-rate loans to SMEs in Nigeria. This directly addresses the challenge of high interest rates that are unfavorable for SMEs. However, we have discovered that since this opportunity became available, many SMEs lack the structure to access it. Many of them operate without registration. They don’t have a dedicated business account as they use their private accounts to conduct transactions. This makes it difficult to establish their credit history, creditworthiness, and other issues.
To address this challenge, we are working with other government agencies such as the Corporate Affairs Commission to expand and deepen registrations, while also conducting more training on business management principles and basic things like bookkeeping, among others. We just concluded a masterclass facilitated by the World Bank on how to pitch effectively for private capital. Our 2024 Informal Economy Report, which we did together with one of our partners, Moniepoint, also revealed that the workforce, competent and trustworthy staff, is a challenge for SMEs.
So workforce support is a strong focus for us. One of the key planks of our GROW Nigerian strategy contains our theory of change for SME development in Nigeria for the next four years. GROW is an acronym for Guidance, Resources, Opportunities, and Workforce Support. We believe that with the right amount of these, any nano business can grow to become a micro, small, medium, and then large enterprise. The GROW Nigerian strategy also outlined the eight sectors we are focusing on because our research showed that they have the greatest potential for growth and impact. We are committing resources to these sectors and supporting players in the SME value chain to grow their capacity, attract investments, and create jobs and opportunities for economic expansion. We want to rebuild our local production capacity to meet demand at home and compete globally in foreign markets.
How does SMEDAN support its members in navigating regulatory frameworks, access to finance, and other critical issues?
As an advocate for small businesses, we ensure that their policy needs and regulatory demands inform policymaking and regulatory reforms across government levels. In December 2023, the Vice President, Kashim Shettima inaugurated the National Council on MSMEs, which he chairs. The council includes governors and other government agencies at the federal and state levels whose operations impact the ecosystem. SMEDAN serves as the secretariat of the council, and part of our duties is ensuring that small businesses nationwide can channel their demands for timely and effective responses from the relevant parties within the council. We have established a robust and accessible feedback-gathering mechanism with a local presence to ensure that we hear from SMEs and that their demands inform policies.
In addition to this, we have signed several beneficial partnerships and deals that businesses registered with us can take advantage of. These partnerships are with both private and public organisations. For example, we have a deal with the Nigerian Postal Service and GIG Logistics that allows SMEs registered with us to benefit from discounted shipping rates when sending goods anywhere in the country. We implemented this to lower the cost of business operations and increase market and sales opportunities for SMEs. We are also working closely with agencies such as the National Agency for Food and Drugs Administration and Control, Standard Organisation of Nigeria, and CAC to streamline their operations and ensure that SMEs receive support to operate and scale.
We have a counterpart funding arrangement with the governments of Katsina, Enugu, Anambra, Cross River, Zamfara, and the Bank of Industry, totaling about N6bn in single-digit interest rate loans that businesses registered with us can access. This is in addition to the N5bn available at Sterling Bank, also at a single-digit interest rate, due to a partnership with us.
How is technology transforming the landscape for SMEs in Nigeria and how does SMEDAN assist businesses on this?
Technology is rapidly transforming the business landscape, and we at SMEDAN are committed to ensuring that Nigerian SMEs are well-positioned to capitalise on these opportunities. To achieve this, we have established a dedicated Creative, Digital, Innovation, and Intellectual Property Desk. This initiative is designed to equip SMEs with the necessary tools and knowledge to thrive in the digital age. We are actively collaborating with industry leaders like Google to provide cutting-edge training and support to our SME community.
For instance, Google recently led a masterclass at our National MSME Conference, focusing on sustaining a digital and innovation-led economy. This partnership indicates our commitment to enabling a vibrant digital ecosystem and empowering SMEs to harness the power of technology. By leveraging the potential of digital technologies, SMEs can enhance their productivity, expand their market reach, and ultimately drive economic growth.
How do you engage with government bodies to advocate policies that benefit SMEs?
We work closely with all membership agencies of the National Council on SMEs, which we serve as the secretariat. Chaired by Vice President, Kashim Shettima, this council plays a crucial role in shaping the nation’s SME policy landscape.
We have forged strategic partnerships with key government agencies to empower SMEs. We are collaborating with the Rural Electrification Agency to ensure a reliable and affordable electricity supply to rural SMEs, thereby boosting productivity and economic growth. We are partnering with the National Information Technology Development Agency to promote digital literacy, cybersecurity, and e-commerce solutions among SMEs. We are working together with the Nigeria Data Protection Commission to educate SMEs on data privacy regulations and best practices, safeguarding their sensitive information. We are collaborating with the NIPOST to streamline logistics and shipping processes for SMEs, reducing costs and improving delivery times.
Additionally, we are working closely with the National Youth Service Corps to harness the energy and skills of young Nigerians to support SME development initiatives. We are collaborating with the NAFDAC to assist SMEs in complying with food safety and drug regulations, ensuring product quality and consumer safety. We are working with the CAC to facilitate business registration and incorporation processes for SMEs, reducing bureaucratic hurdles. Through these partnerships, we have achieved significant milestones.
We have worked with regulatory agencies to streamline procedures and reduce the time and cost associated with obtaining necessary permits and licenses. We have facilitated access to affordable credit and financing options for SMEs, enabling them to invest in growth and expansion. We have connected SMEs to domestic and international markets, creating opportunities for export and import activities. We have implemented training programs to equip SMEs with the skills and knowledge needed to succeed in a competitive market. We have advocated for policies that support SME growth and development, influencing government decisions and regulations.
Can you share some of the training and development programmes offered by SMEDAN to enhance the skills of SMEs?
We are committed to upskilling SMEs and improving their access to opportunities, including finance. We want to give them the necessary skills to thrive in today’s dynamic business landscape. Through initiatives like the National Business Skills Development Initiative, we offer comprehensive training programs that cover a wide range of topics, from business management and financial literacy to digital marketing and e-commerce. By providing hands-on training and practical tools, we empower SMEs to enhance their productivity, improve their business operations, and increase their competitiveness.
In addition to our in-house training programs, we collaborate with renowned organisations to deliver specialised training. Our partnership with Google has enabled us to provide digital literacy training, equipping SMEs with the skills to leverage technology and harness the power of the internet. We have also partnered with the UN’s World Intellectual Property Organisation to offer training on intellectual property rights, helping SMEs protect their innovative ideas and brand assets.
To further support SMEs, we have organised workshops on effective pitching for investments, enabling entrepreneurs to confidently present their business ideas to potential investors. We have also conducted training sessions on leveraging the African Continental Free Trade Area, empowering SMEs to tap into new markets and expand their customer base. Furthermore, we are actively working with the US government to increase the adoption of the African Growth and Opportunity Act. By providing guidance and support, we aim to help SMEs capitalise on this preferential trade agreement and boost their export potential.
What is your vision for the future of SMEs in Nigeria, and how does SMEDAN plan to contribute to this vision over the next five years?
We envision a future where Nigerian SMEs are globally competitive and improve the standard of living for millions of Nigerians. To realise this vision, SMEDAN is committed to empowering SMEs through the GROW Nigerian Strategy. By focusing on Guidance, Resources, Opportunities, and Workforce Support, we will enable SMEs to scale up and compete globally. We will continue to invest in digital initiatives, providing SMEs with the tools and training they need to leverage technology and embrace the digital economy. We will work tirelessly to create an enabling environment for SMEs to access affordable financing, partnering with financial institutions to develop innovative financial products tailored to their needs. We will collaborate with government agencies, private sector organizations, and international partners to create a supportive ecosystem that fosters SME growth and innovation.
We will advocate for policies that promote SME development, such as tax incentives, regulatory reforms, and infrastructure development. For example, we worked very closely with the Taiwo Oyedele-led Presidential Committee on Fiscal Policy and Tax Reforms to ensure that SME growth was a key focus. We will continue to invest in capacity-building programs to equip SMEs with the skills and knowledge they need to succeed. By implementing these strategies, SMEDAN is confident in its ability to contribute significantly to the growth and development of Nigeria’s SME sector, positioning the country as a global leader in entrepreneurship and innovation.
The MPC recently raised the interest rate, how is that affecting SMEs?
The high cost of lending is one obvious effect. To address this issue, we are actively collaborating with financial institutions to establish dedicated funds that offer single-digit interest-rate loans to SMEs. Additionally, we are expanding our counterpart fund arrangements with state governments nationwide to provide further financial support. So far, we have been able to mobilise over N11bn through these initiatives. We are also actively seeking international partnerships to attract foreign investment into the Nigerian SME sector. To reduce operational costs for SMEs, we are revitalising and remodeling our common facility centers, including the Industrial Development Centres, to provide discounted access to essential resources such as modern tools and power.
The country faces significant challenges, including persistent inflation and legacy issues that have been decades in the making. To address these challenges, difficult decisions must be made. Amid these challenges, it is our responsibility to ensure that SMEs have the necessary support to weather the storm and continue to grow.
You mentioned AGOA earlier, how many SMEs have benefited from the platform?
Currently, the adoption rate of the AGOA among Nigerian SMEs is below our desired level. While we have a handful of agro-businesses and textile businesses successfully leveraging this trade agreement, the full potential of AGOA remains untapped. To address this, we are intensifying our efforts to raise awareness and educate Nigerian SMEs about the benefits and opportunities offered by AGOA. We are collaborating with the US government to provide comprehensive guidance and support, helping SMEs navigate the complexities of exporting to the US market. Recently, we participated in a high-level delegation to Washington D.C advocating for the extension of AGOA and streamlined export processes.
We are also investing significant resources to enhance the production capacity of Nigerian SMEs. By improving quality standards, increasing efficiency, and providing access to modern technology, we aim to ensure that Nigerian products meet the requirements of the US market and avoid border rejections. We are collaborating with agencies such as the Nigerian Export Promotion Council, SON, Nigeria Customs Service, and other relevant bodies. The US market presents a vast opportunity for Nigerian SMEs to expand their reach, generate foreign exchange, and create jobs. We are serious about supporting these businesses by ensuring adequate access to finance, streamlining regulatory procedures, and facilitating market linkages.
There is this concern that Nigerian agro-products are rejected outside the country due to poor packaging; how should SMEs tackle this challenge?
SMEDAN is taking a multi-faceted approach to addressing this challenge. We are investing in infrastructure and knowledge transfer to empower SMEs to meet global standards. We have established dedicated packaging facilities, such as the one at our IDC in Idu, Abuja, which we plan to replicate across the country. These facilities provide SMEs with access to state-of-the-art equipment and training on best practices in packaging and labeling. Our agro-businesses department is actively working with farmers to improve crop selection, implement modern farming techniques, and enhance post-harvest handling. By focusing on quality control and standardisation, we want to increase harvest yields for local consumption so we can drive down the cost of food staples, while also producing high-quality agricultural products that meet international standards.
Furthermore, we are educating SMEs about the importance of branding and packaging in building strong brand identities and attracting consumers. By investing in attractive and functional packaging, SMEs can differentiate their products and increase their market value.
How are SMEs coping with the current economic hardship?
Many SMEs are demonstrating resilience and adaptability by embracing innovation. SMEDAN is actively supporting these efforts by reducing operational costs. Our Industrial Development Centres offer discounted access to essential resources like power and modern machinery. For instance, our recent partnership with UNDP has enabled us to solarize the IDU, providing affordable, clean energy to SMEs in sectors such as fashion, textile, and carpentry. In addition to cost reduction, we are working to expand market access for SMEs. We are facilitating exports and helping SMEs compete in foreign markets.
