News
SMEs as a Key Driver to Economic Growth in an Emerging Market
Adewale A. Adeyipo
In spite of the harsh economic conditions Nigeria is faced with, recent trends have shown there are opportunities for growth of the SME Industry in Nigeria. As reported by Nigeria Bureau of Statistics, 2019 Q1 GDP grew by 2.01%, with majority of this growth being associated with the Non-Oil Sector which is a positive sign and indicative of Nigeria’s possible diversification and less reliance on the oil sector to drive her economy.
The International Monetary Fund forecasts that GDP will increase by 2.1% in 2019, which would make Nigeria one of Africa’s slowest-growing economies and means that growth is negative in per capita terms.
While inflation is at 11.4% and has been above the Central Bank’s target of 6% to 9% for almost four years. How then can Nigeria survive the next four years of uncertainties in revenue generation, debt recovery rate, a further devaluation of Naira, low FDI flows into Nigeria in 2018, expected high fuel prices and insecurity? A recent report from Trading Economics shows that Nigeria’s all-time low of FDI inflow for 2018 Q4 was $314 million.
Nigeria’s population median age is 18 years that is made up of young, vibrant, skilled, and unskilled youths. With this youthful population and despite the tough economic conditions, I firmly believe Youth engagement through the SME approach can drive economic growth.
One of the key drivers to economic development in an emerging economy has been the successful engagement of SMEs, while the growth of economic development has been an essential goal for many developing nations of the world.
I wonder sometimes how a country with a 23% unemployment rate, inflation rate of 11.4% plans gets her citizen out of poverty which currently stand at 33.1% if not by empowering the populace that are living below the ‘Poverty Line. i.e. they live and sustain with less than $1 a day. The more people we have actively engaged, the better we are as a nation and with poverty alleviation.
The contribution of SMEs has been accepted as one of the primary supports for economic growth because of its ability to enhance economic output and improve human welfare. With so many challenges faced with SMEs in Nigeria today, low FDI inflows in 2018 is another critical indicator showing why tech firms like Google would establish an AI lab in Ghana and not in Nigeria despite current economic indicators showing that the Nigerian economy is stronger than Ghana’s economy.
Before a technological investment is made in any economy, the investing party measures the opportunity for growth, existing infrastructure, and innovation. Such parameters have side-lined Nigeria for several years. FDI inflow in Nigeria for Q1 2019 was recorded at $1.1 B (Trading Economics Reports).
Though many argue that FDI in Nigeria is usually low after a general election. The point remains that investors must see the basic amenities on ground before coming into any nation which of course stability and security is essential.
Jeff Dean’ the leading AI software engineer at Google, stated that Ghana is the ‘Future of Africa’ and it had to do with the robust network of academic institutions as well as infrastructure in place which was a significant factor on establishing an AI lab in Accra. – Aside from the ‘not too deliberate approach’ from the Government, inadequate Private-Public partnerships and collaborations amongst Government agencies.
The SMEs in Nigeria also lack access to relatively cheap and effective sources of funding, which hinders their growth and contribution to economic growth.
Agencies like SMEDAN can emulate Malaysia NSDC (National SME Development Council) as a use case where they demonstrated a positive impact on their economy since it was established in 2004.
As at 2015, the contribution of SME to the Malaysian economy was measured in terms of their share of the total number of businesses (97.3%) and share of the total number of jobs created at 59%. (Department of Statistics Malaysia)
International Finance Cooperation & World Bank’s Support on SMEs
Without a doubt, Government policies are one of the essential drivers for SMEs developments in any nation.
Two decades ago, Global Financial Institutions and Economic Organizations like World Bank and International Finance Corporation (IFC) emphasized the significance of small and medium-sized enterprises (SMEs), especially in developing regions like Nigeria, these bodies had consistently sought the support of the Government to implement policies for sustainable growth in human capital, financial inclusion, and technological advancement.
According to the World Bank Group, ‘The country partnership strategy period (FY2014-FY2019) has an investment of $8.8 billion through the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD).
Nigeria has been one of the International Finance Corporation’s (IFC) fastest growing portfolio and represents IFC’s fifth largest global country exposure, with a committed volume of $1.8 billion. Their support for Nigeria is structured around several priorities, which include promoting diversified growth and job creation with a focus on youth, women and the poor in marginalized areas; whilst improving social and financial inclusion.
It was estimated that most developing economies have a high potential in ensuring diversification, inclusiveness, and expansion of industrial production as well as the fulfillment of the fundamental objectives of development. As reported by the World Bank Group, the Country partnership period (FY2014 – FY2019) for Nigeria is expected to have achieved:
- 16% increase in power generation capacity; 8% increase in transmission capacity
- Improved access of small farmers to inputs and technology and improvement in their average income
- Improved road access for two million people in rural areas.
- Additional two million micro-entrepreneurs provided with financial services.
- Additional 100,000 loans provided to Small and medium enterprises (SMEs).
World Bank has estimated the growth rate for Nigeria’s economy in 2019 at 2.1% with job creation rise of 10% quarter-on-quarter if local or raw materials and resources are well utilized. SMEs depends on the use of raw materials and innovative technologies to further assist them in achieving their goal of self- reliance.
For example, Provision of starch as a raw material to the market can provide jobs for three different levels in starch production, Starch for consumption, starch for clothing, starch for pharmaceuticals. In this ecosystem, the raw material provider and the user creates more jobs and keep the SME ecosystem sustainable.
Adewale A. Adeyipo is Ag. CEO CWG Plc
News
Legit.ng, Shade of Life Foundation Partner to Advance Autism Awareness in Nigeria
Legit.ng recently joined forces with the Shade of Life Foundation to become a voice of autism, and drive advocacy for improved media support during Autism Awareness Month.
Conversations around media support exploration was led by Joseph Omotayo, head of Department for Human Interest Stories at Legit.ng, and Dr. Eziafakaku Nwokolo, founder and CEO of the Shade of Life Foundation,
This partnership is a response to the concerns raised by organizations like the Shade of Life Foundation about the level of support received from the media in discussing autism as a disability.
While other disabilities may receive attention, autism, with its critical developmental implications often lacks adequate representation in mainstream media.
Recognizing the importance of addressing these concerns, Legit.ng took proactive steps by integrating itself into the essence of autism awareness.
It facilitated a one-hour workshop with Dr. Nwokolo, the founder of the foundation, to deepen our understanding of autism, its various spectrums, and the language boundaries associated with it.
Other steps we took in advocating autism awareness in the media, can be seen in our attached press release.
Legit.ng believes that by amplifying the voices of autism and advocating for better media representation, we can contribute to creating a more inclusive and accepting society for all.
News
As Nigeria Struggle, Tanzania Turns off Power Plants Due to Excess Supply
While 85 per cent of Nigeria is in darkness, Tanzania, an African country has shut down five hydroelectric stations in a bid to reduce excess electricity in the national grid.
Kassim Majaliwa, prime minister, Tanzania, has said the main plant, Mwalimu Nyerere Hydroelectric Station, alone generated enough electricity to power major cities, including Dar es Salaam, the country’s commercial hub.
It is the first time Tanzania, which suffers chronic power shortages, has closed hydroelectric stations due to excess production.
“We have turned off all these stations because the demand is low and the electricity production is too much, we have no allocation now,” an official from state-run power company, Tanesco, said.
The 2,115MW Julius Nyerere Hydropower Dam is said to be almost filled with water following heavy rains that started early this year.
Meanwhile, while the country has an installed capacity of 1,938MW and the grid installed capacity of 1,899MW, Nigeria which has an installed capacity of 13,000MW is struggling to electrify 85 per cent of its electricity consumers.
News
President Tinubu Appoints Jim Ovia as Student Loan Fund Chairman
President Bola Tinubu has approved the appointment of Jim Ovia, renowned banker and businessman, as the Chairman, Board of the Nigerian Education Loan Fund.
Ovia’s appointment is contained in a State House statement titled, ‘President Tinubu appoints Jim Ovia as Chairman of the Nigerian Education Loan Fund,’ and issued on Friday by Ajuri Ngelale, special adviser to the President, Media & Publicity.
The statement noted that “Ovia is the founder of one of Nigeria’s leading banks and a respected business leader, with a surfeit of efforts and benefaction towards nurturing and empowering young Nigerians.
“He is an alumnus of Harvard Business School and holds a Master’s in Business Administration from the University of Louisiana.”
The National Student Loan Programme is a pivotal intervention that seeks to guarantee sustainable higher education and functional skill development for all Nigerian students and youths.
The Nigerian Education Loan Fund, the implementing institution of this innovation, demands excellence and Nigerians of the finest professional ilk to guide and manage.
“The President believes Mr. Ovia will bring his immense wealth of experience and professional stature to this role to advance the all-important vision of ensuring that no Nigerian student suffers a capricious end to their pursuit of higher education over a lack of funds,” the statement partly read.
Ovia’s appointment will also ensure “that Nigerian youths, irrespective of who they are, have access to higher education and skills that will make them productive members of society and core contributors to the knowledge-based global economy of this century.”
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