The role of small scale industries in nigeria economy?

In: Small Business and Entrepreneurship, Nigeria, Industries [Edit categories] Real Estate in Dubaiwww.TheFirstGroup.com Amazing Capital Growth on Luxury Apartments $400,000. Great Returns! Ads [Improve] Small & Medium Scale Enterprises and Funding in Nigeria (Posted 25th Aug, 2003) NIGERIAN ECONOMY DEPENDS ON THE RECOGNITION OF SMEs Historical facts show that prior to the late 19th century, cottage industries, mostly small and medium scale businesses controlled the economy of Europe. The industrial revolution changed the status quo and introduced mass production. The twin oil shocks during the 1970s undermined the mass production model, which triggered an unexpected reappraisal of the role and importance of small and medium sized enterprises in the global economy. Findings by economists over the years show that small firms and entrepreneurships play a much more important role in economic growth and development. Importance of SMEs Many economies, developed and developing have come to realise the value of small businesses. They are seen to be characterised by dynamism, witty innovations, efficiency, and their small size allows for faster decision-making process. Governments all over the world have realised the importance of this category of companies and have formulated comprehensive public policies to encourage, support and fund the establishment of SME's. Developments in small and medium enterprise are a sin quo non for employment generation, solid entrepreneurial base and encouragement for the use of local raw materials and technology. Giving insight into the SME phenomenon, a paper delivered at a forum by Mallam Mohammed Hayatu Deen, titled "Stakeholders Roles and the Development Benefits in a Virile Small Enterprise Sector", pointed out that small business operations are propelled by the dynamic theory, which makes them efficient and prone to constant change. He gave a comparative statistic using 9 developed countries on how SMEs create employment, increase job growth, induce change, innovation and competition. Benefits of the SME The benefits of SME's to any economy are easily noticeable, they include: contribution to the economy in terms of output of goods and services; creation of jobs at relatively low capital cost, especially in the fast growing service sector; provide a vehicle for reducing income disparities; develop a pool of skilled and semi-skilled workers as a basis for the future industrial expansion; improve forward and backward linkages between economically, socially and geographically diverse sectors of the economy; provide opportunities for developing and adapting appropriate technological approaches; offer an excellent breeding ground for entrepreneurial and managerial talent, the critical shortage of which is often a great handicap to economic development, among others. Challenges faced by SME s in Nigeria The challenges facing SME's in many developing countries are monumental. The most worrying among these challenges is funding. Most new small business enterprises are not very attractive prospects for banks, as they want to minimise their risk profile. In Nigeria, the situation is not very different, until recently when the Banker's Committee intervened in 2001 with a scheme themed the Small and Medium Industries Equity Investment Scheme (SMIEIS). The scheme relegated to the background government credit schemes that are not well thought-out and implemented. The SMIEIS Scheme The Banker's Committee is a body constituted by representatives of banks in Nigeria. The scheme was approved at their 246th meeting on December 21, 1999. According to them, this was a response to President Obasanjo's concern and policy measures for the promotion of small and medium industries (SMI) as a vehicle for rapid industrialisation, sustainable economic development, poverty alleviation and employment generation. The scheme requires all banks in Nigeria to set aside 10% of their profit before tax (PBT) for equity investment in small and medium scale industries. The scheme commenced on June 19th 2001. The scheme aims among other things to assist the establishment of new, viable SMI projects, thereby stimulating economic growth, development of local technology, promote indigenous entrepreneurship and generate employment. The funds will be available for projects in the real sector of the economy which include: agro-allied, information technology and telecommunication, manufacturing, educational

support and fund the establishment of SME's. They are seen to be characterised by dynamism. One of such is the independent fund manager called the SME Manager Limited (SML). Comply with all applicable tax laws and regulations and render regular returns to the appropriate authorities. . a paper delivered at a forum by Mallam Mohammed Hayatu Deen. and their small size allows for faster decision-making process. mostly small and medium scale businesses controlled the economy of Europe. Also. witty innovations.7% of value. the banks are advised to spread their funds wider. To qualify for the scheme. With services sector having 73. solid minerals. recent development like the SMIEIS and some other funding sources are now open. Nigeria s economic terrain is very constraining with the focus being concentrated on the big firms which are constantly down-sizing. Giving insight into the SME phenomenon.6% of total number and 87. an enterprise. The enterprise must be registered as a limited liability company with the Corporate Affairs Commission and comply with all relevant regulations of the Companies and Allied Matters Act (1990) such as filing of annual returns including audited financial statement.1% investments in number and 64. the Government. solid entrepreneurial base and encouragement for the use of local raw materials and technology. Alternative Sources of Funding For small businesses shopping for funding can be quite a Herculean experience.07 billion with 28 banks investing around N2. cottage industries. must have a maximum asset base of N200 million excluding land and working capital. of the United States. Small & Medium Scale Enterprises and Funding in Nigeria (Posted 25th Aug. The industrial revolution changed the status quo and introduced mass production. available are: the Bank of Industry. the CBN should monitor closely some of the defaulting participating banks in the SMIEIS scheme. Findings by economists over the years show that small firms and entrepreneurships play a much more important role in economic growth and development. Business people that fall in the SME category have frequently accused the banks of providing funding to only their cronies and favoured companies. and any other activity as may be determined from time to time by the Bankers Committee. services (directly related to production in the real sector or to enhance production). with the number of staff employed by the enterprise not less than 10 and not more than 300. Bankers Committee and the individual banks. The twin oil shocks during the 1970s undermined the mass production model. Minna Nigeria. each playing a unique role to ensure the success of the scheme. Governments all over the world have realised the importance of this category of companies and have formulated comprehensive public policies to encourage.establishments. efficiency. construction. Way Forward and Conclusion Much is expected from the government to provide basic social and infrastructural facilities to assist small businesses. which is an investment advisory company established by African Capital Alliance (ACA) to promote SME sector-led investments in Nigeria by making equity investments in Nigerian SMEs. 2003) NIGERIAN ECONOMY DEPENDS ON THE RECOGNITION OF SMEs Historical facts show that prior to the late 19th century. Developments in small and medium enterprise are a sin quo non for employment generation.6% of value and Lagos-based investments accruing 86. Timing of investment exit shall be a minimum of 3 years. Available data as at February 2003 indicate that 80 banks have set aside N13. But. On the part of government. which triggered an unexpected reappraisal of the role and importance of small and medium sized enterprises in the global economy. titled "Stakeholders Roles and the Development Benefits in a Virile Small Enterprise Sector". AGOA. There are 4 categories of stakeholders in the SMIEIS scheme. tourism and leisure. policies that promote inward induced investment should be encouraged far and above This is answered by Akogu Abbai David davesquare2000@yahoo. the New Partnership for African Development (NEPAD) initiative and the African Growth and Opportunity Act. Also.com 08058455069. 08068993106 Niger State College of Education. developed and developing have come to realise the value of small businesses. Importance of SMEs Many economies. Central Bank of Nigeria (CBN).87 billion based on 67 investments in 47 enterprises. But the banks have denied such allegations saying that many of the SMEs cannot meet up with banks requirements. in addition to being engaged in any of the activities listed above.

Available data as at February 2003 indicate that 80 banks have set aside N13. with the number of staff employed by the enterprise not less than 10 and not more than 300. must have a maximum asset base of N200 million excluding land and working capital. Comply with all applicable tax laws and regulations and render regular returns to the appropriate authorities. until recently when the Banker's Committee intervened in 2001 with a scheme themed the Small and Medium Industries Equity Investment Scheme (SMIEIS). they include: contribution to the economy in terms of output of goods and services. which is an investment advisory company established by African Capital Alliance (ACA) to promote SME sector-led investments in Nigeria by making equity investments in Nigerian SMEs. Also. in addition to being engaged in any of the activities listed above. develop a pool of skilled and semi-skilled workers as a basis for the future industrial expansion. AGOA. as they want to minimise their risk profile. provide a vehicle for reducing income disparities. The scheme aims among other things to assist the establishment of new. One of such is the independent fund manager called the SME Manager Limited (SML). There are 4 categories of stakeholders in the SMIEIS scheme. viable SMI projects. Business people that fall in the SME category have frequently . which makes them efficient and prone to constant change. each playing a unique role to ensure the success of the scheme. an enterprise. recent development like the SMIEIS and some other funding sources are now open. of the United States. The scheme relegated to the background government credit schemes that are not well thought-out and implemented. services (directly related to production in the real sector or to enhance production). Central Bank of Nigeria (CBN).07 billion with 28 banks investing around N2. increase job growth. the situation is not very different. Nigeria's economic terrain is very constraining with the focus being concentrated on the big firms which are constantly down-sizing. especially in the fast growing service sector. The SMIEIS Scheme The Banker's Committee is a body constituted by representatives of banks in Nigeria. 1999. The scheme requires all banks in Nigeria to set aside 10% of their profit before tax (PBT) for equity investment in small and medium scale industries. promote indigenous entrepreneurship and generate employment. Challenges faced by SME's in Nigeria The challenges facing SME's in many developing countries are monumental. poverty alleviation and employment generation.pointed out that small business operations are propelled by the dynamic theory. among others. tourism and leisure. and any other activity as may be determined from time to time by the Bankers' Committee. innovation and competition. this was a response to President Obasanjo's concern and policy measures for the promotion of small and medium industries (SMI) as a vehicle for rapid industrialisation.87 billion based on 67 investments in 47 enterprises. the New Partnership for African Development (NEPAD) initiative and the African Growth and Opportunity Act. Bankers' Committee and the individual banks. According to them. The most worrying among these challenges is funding. Benefits of the SME The benefits of SME's to any economy are easily noticeable. In Nigeria. provide opportunities for developing and adapting appropriate technological approaches. solid minerals. thereby stimulating economic growth. To qualify for the scheme. construction. manufacturing. Timing of investment exit shall be a minimum of 3 years. Most new small business enterprises are not very attractive prospects for banks. the critical shortage of which is often a great handicap to economic development. The funds will be available for projects in the real sector of the economy which include: agro-allied. educational establishments. offer an excellent breeding ground for entrepreneurial and managerial talent. The enterprise must be registered as a limited liability company with the Corporate Affairs Commission and comply with all relevant regulations of the Companies and Allied Matters Act (1990) such as filing of annual returns including audited financial statement. available are: the Bank of Industry. The scheme was approved at their 246th meeting on December 21. Way Forward and Conclusion Much is expected from the government to provide basic social and infrastructural facilities to assist small businesses. socially and geographically diverse sectors of the economy. improve forward and backward linkages between economically. the Government. But. The scheme commenced on June 19th 2001. sustainable economic development. He gave a comparative statistic using 9 developed countries on how SMEs create employment. development of local technology. Alternative Sources of Funding For small businesses shopping for funding can be quite a Herculean experience. information technology and telecommunication. induce change. creation of jobs at relatively low capital cost.

innovation and competition. 08068993106 Niger State College of Education. Findings by economists over the years show that small firms and entrepreneurships play a much more important role in economic growth and development. They are seen to be characterised by dynamism. solid entrepreneurial base and encouragement for the use of local raw materials and technology. which triggered an unexpected reappraisal of the role and importance of small and medium sized enterprises in the global economy. provide a vehicle for reducing income disparities. induce change. this was a response to President Obasanjo's concern and policy measures for the promotion of small and medium industries (SMI) as a vehicle for rapid industrialisation. especially in the fast growing service sector. Also. they include: contribution to the economy in terms of output of goods and services. among others.6% of total number and 87. The SMIEIS Scheme The Banker's Committee is a body constituted by representatives of banks in Nigeria. The twin oil shocks during the 1970s undermined the mass production model. Small & Medium Scale Enterprises and Funding in Nigeria (Posted 25th Aug. On the part of government. According to them.6% of value and Lagos-based investments accruing 86.7% of value. Most new small business enterprises are not very attractive prospects for banks. The industrial revolution changed the status quo and introduced mass production. support and fund the establishment of SME's. But the banks have denied such allegations saying that many of the SMEs cannot meet up with banks' requirements. Developments in small and medium enterprise are a sin quo non for employment generation. policies that promote inward induced investment should be encouraged far and above This is answered by Akogu Abbai David davesquare2000@yahoo. sustainable economic development. developed and developing have come to realise the value of small businesses. until recently when the Banker's Committee intervened in 2001 with a scheme themed the Small and Medium Industries Equity Investment Scheme (SMIEIS).com 08058455069. increase job growth. Giving insight into the SME phenomenon. Governments all over the world have realised the importance of this category of companies and have formulated comprehensive public policies to encourage. In Nigeria. Benefits of the SME The benefits of SME's to any economy are easily noticeable. 2003) NIGERIAN ECONOMY DEPENDS ON THE RECOGNITION OF SMEs Historical facts show that prior to the late 19th century. cottage industries. witty innovations. pointed out that small business operations are propelled by the dynamic theory. as they want to minimise their risk profile. efficiency. Challenges faced by SME's in Nigeria The challenges facing SME's in many developing countries are monumental. offer an excellent breeding ground for entrepreneurial and managerial talent. which makes them efficient and prone to constant change. the critical shortage of which is often a great handicap to economic development. the situation is not very different.accused the banks of providing funding to only their cronies and favoured companies.1% investments in number and 64. The scheme commenced on June . He gave a comparative statistic using 9 developed countries on how SMEs create employment. and their small size allows for faster decision-making process. mostly small and medium scale businesses controlled the economy of Europe. 1999. the CBN should monitor closely some of the defaulting participating banks in the SMIEIS scheme. the banks are advised to spread their funds wider. titled "Stakeholders Roles and the Development Benefits in a Virile Small Enterprise Sector". provide opportunities for developing and adapting appropriate technological approaches. creation of jobs at relatively low capital cost. Importance of SMEs Many economies. The most worrying among these challenges is funding. The scheme was approved at their 246th meeting on December 21. poverty alleviation and employment generation. With services sector having 73. improve forward and backward linkages between economically. a paper delivered at a forum by Mallam Mohammed Hayatu Deen. The scheme relegated to the background government credit schemes that are not well thought-out and implemented. socially and geographically diverse sectors of the economy. The scheme requires all banks in Nigeria to set aside 10% of their profit before tax (PBT) for equity investment in small and medium scale industries. Minna Nigeria. develop a pool of skilled and semi-skilled workers as a basis for the future industrial expansion.

development of local technology. 08068993106 Niger State College of Education.19th 2001. promote indigenous entrepreneurship and generate employment. Central Bank of Nigeria (CBN). Comply with all applicable tax laws and regulations and render regular returns to the appropriate authorities. There are 4 categories of stakeholders in the SMIEIS scheme. which is an investment advisory company established by African Capital Alliance (ACA) to promote SME sector-led investments in Nigeria by making equity investments in Nigerian SMEs.6% of value and Lagos-based investments accruing 86. each playing a unique role to ensure the success of the scheme. Timing of investment exit shall be a minimum of 3 years. Nigeria's economic terrain is very constraining with the focus being concentrated on the big firms which are constantly down-sizing. the New Partnership for African Development (NEPAD) initiative and the African Growth and Opportunity Act. The funds will be available for projects in the real sector of the economy which include: agro-allied. information technology and telecommunication. solid minerals. Alternative Sources of Funding For small businesses shopping for funding can be quite a Herculean experience.87 billion based on 67 investments in 47 enterprises. Also. AGOA. Thanks. the Government. Minna Nigeria. The scheme aims among other things to assist the establishment of new. This article may be outdated following the current development in Nigeria used as context. manufacturing. educational establishments. Business people that fall in the SME category have frequently accused the banks of providing funding to only their cronies and favoured companies. But the banks have denied such allegations saying that many of the SMEs cannot meet up with banks' requirements. recent development like the SMIEIS and some other funding sources are now open. with the number of staff employed by the enterprise not less than 10 and not more than 300. available are: the Bank of Industry.07 billion with 28 banks investing around N2. On the part of government. the banks are advised to spread their funds wider. an enterprise.7% of value. .6% of total number and 87. With services sector having 73. Also. Available data as at February 2003 indicate that 80 banks have set aside N13. construction. Bankers' Committee and the individual banks. tourism and leisure. The enterprise must be registered as a limited liability company with the Corporate Affairs Commission and comply with all relevant regulations of the Companies and Allied Matters Act (1990) such as filing of annual returns including audited financial statement. To qualify for the scheme.1% investments in number and 64. am still working on the supplementaary current roles of SMS in Nigeria Economy. must have a maximum asset base of N200 million excluding land and working capital. But. and any other activity as may be determined from time to time by the Bankers' Committee. the CBN should monitor closely some of the defaulting participating banks in the SMIEIS scheme. viable SMI projects. thereby stimulating economic growth.com 08058455069. Way Forward and Conclusion Much is expected from the government to provide basic social and infrastructural facilities to assist small businesses. of the United States. One of such is the independent fund manager called the SME Manager Limited (SML). services (directly related to production in the real sector or to enhance production). policies that promote inward induced investment should be encouraged far and above This is answered by Akogu Abbai David davesquare2000@yahoo. in addition to being engaged in any of the activities listed above. Though useful.

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