Op-Ed.
Collapse of the SMEs sector

There is no gainsaying the fact that Small and Medium Scale Enterprises, SMEs are the engine of any economy. From the Philippines to Germany, South Korea to India, virtually every economy is dominated by and sustained through activities in this, ordinarily, diffused, but cumulatively most influential sector.
One area in which the impact of SMEs is felt is in the critical area of employment. This is, therefore, why the loss of an estimated two million SMEs between 2017 and 2021 in the sector, as recently revealed by the Director General of the Small and Medium Enterprises Development Agency in Nigeria, Olawale Fasanya, is simply bad news. It can only aggravate the rising unemployment and poverty level in the country.
While analysts would find a myriad of explanations for this development, one very obvious fall-out is that some extant government policies geared towards addressing the challenges facing the SME sector have clearly failed to meet their set objectives and deliver the anticipated dividends. Again, there will be many explanations for this.
For Business Hallmark however, it is shocking that with this very appalling record, and in defiance of all of the data before us, government is still mindlessly pushing for more taxes to be imposed on the sector. This is also in the midst of poor infrastructure, such as energy, power and other utilities and amenities, as well as continually galloping inflation and the chronic lack of finance at market efficient rates.
To be fair, the departing government has clearly been interventionist in a number of respects with the CBN alone having pumped over a trillion naira into different schemes to boost the economy. But that exactly may be where the primary challenge is: in a largely dysfunctional economic and social structure that we still have on our hands, merely throwing cash at problems actually only creates new problems.
A better and more productive way to go is to address the challenges at the macro-economic level, exactly where they were created in the first place.
There is also the local content initiative that was introduced by government to ensure more and more involvement of local business players, including SMEs, in a number of economic sectors. But the issues of exchange rate fluctuations and the continued dependence on foreign imports has continued to undermine this.
Even when firms like Innoson Motors Limited have since demonstrated capacity to meet a number of our needs, elite bourgeois and neo-colonial proclivities of our leaders and leading lights continue to ensure that their products, which are produced with considerable help and inputs from local SMEs, continue to be under-patronised to the detriment of all.
Underscoring the depth of the crisis for many an SME player is the fact that many businesses continue to complain over the very stringent conditions imposed by banks, as they attempt to access some of the available funding opportunities.
On their part, the banks say they have to go the extra mile to ensure that repayment is not unnecessarily burdensome and that they are not unduly burdened with failed loans that further put a dent on their books.
Indeed, we have seen ridiculous situations, where banks have continually preferred to pay regulatory-imposed fines, rather than lend to SMEs and other patrons they are not sure of their credit worthiness or repayment capability. ‘Water, water everywhere; not a drop to drink.’
There is also the challenge associated with the continuing wanton looting of public resources and a debilitating entitlement mentality toward government funds by public office holders and even beneficiaries of some interventionist schemes. The field is indeed, all muddied up.
One other constraining factor is the tendency for people to go into business without proper training, experience and requisite knowledge. This is a negative strand of the ubiquitous Nigerian can-do spirit that has to be checked.
Equally, existing fiscal and monetary conditions, such as the rate of inflation, cost of money, high Monetary Policy Reserve ratios, unfavourable foreign exchange rate and the tax regime combine to make local products uncompetitive and continue to render local economy at the mercy of imports. This has a direct effect on SMEs, as many of them exist to feed the production lines.
Finally, is the continued emphasis on mega-projects at the expense of building the composite production chain. With political actors concentrating on disingenuously dubbed ‘befitting and world-class’ large-scale projects, like outsized state secretariats, airports, flyovers and similarly large edifices, which, more often than not, involve foreign firms, machinery, personnel and expertise, the field becomes even more clogged for local actors and in particular, SMEs.