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It is alarming that African Small and Medium Enterprises (SMEs) lose $38billion in export opportunities annually. SMEs remain the backbone of African economies, accounting for over 90 per cent of businesses and generating approximately 80 per cent of jobs on the continent. They also contribute significantly to the African Gross Development Product (GDP). The development of African SMEs will stimulate the growth of African economy, which is yet to reach its full potential, compared to Asian and Western economies.
Disclosing this in Abuja at Valcertra Business Summit, the Chief Executive Officer of Valcertra, Prof. Bernard Odoh, lamented that Africa’s participation in global trade accounts for just three per cent of total global trade volume. Odoh traced the huge loss to structural bottlenecks, weak export infrastructure and regulatory constraints. He also enjoined African governments and private sector stakeholders to strengthen policy support, improve trade facilitation and invest in capacity building to enable African SMEs to compete effectively in the global market.
Sadly, African SMEs lose about $38 billion in export opportunities every year. Most of products from Africa suffer undue rejection due to quality control, packaging and documentation. Unfortunately, not less than 70 per cent of African producers find it difficult to penetrate the export market because of man-made barriers. The development should worry African leaders and let them work in concert to develop the SMEs through inter-African trade and huge investment in the sector. This is the time to boost the SMEs with the African Continental Free Trade Area (AfCFTA) as well as the non-oil exports. Let them improve credit facilities to SMEs, especially those in agriculture and women-led enterprises.
Instructively, agricultural produce and goods such as cocoa, hibiscus spices, cashew, honey, ginger, leather and crafts have continued to attract buyers across Europe, the Middle East, Asia and North America. However, the gaps in quality, compliance, traceability and predictable delivery must be addressed for the SMEs to flourish. African exports should be of high quality, well-packaged and competitive.
In Nigeria, SMEs contribute 48 per cent of the national GDP. They also account for 96 per cent of businesses and 84 per cent of employment. Available statistics show that 39,654,385 Micro, Small and Medium Enterprises (MSMEs) operated in Nigeria as of December 2021. Unfortunately, 50 per cent of the SMEs in the country fail in their first year of operation while more than 95 per cent fail during their first five years.
Also, over 40 per cent of small businesses fail due to no market demand for their products or services. They are also encumbered by inability to obtain finance. Infrastructure deficits have been identified as the most pressing problems of SMEs in Nigeria. Apart from high cost of electricity, SMEs are saddled with multiple taxation and other encumbrances. The federal government must also address these surmountable challenges.
About 600 million jobs will be required by 2030 to absorb the growing global workforce. Therefore, SMEs in a developing country like Nigeria should be prioritised in government’s economic policies. It is quite impressive that many Nigerian SMEs, including women, have been exploring exporting channels to rich the international market, though the volumes fail short of expectations. The Nigerian Export Promotion Council (NEPC) should organise workshops to educate SMEs on opportunities in export market and how to package their products.
Good enough, the World Bank has approved $500million financing package for Nigeria to increases access to funding for Micro Small and Medium Enterprises (MSMEs) across the country. Under the “Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) project,” $400 million loan comes from the International Bank for Reconstruction and Development (IBRD) and $100million comes from the International Development Association (IDA) credit. The facility will be managed by the Development Bank of Nigeria (DBN) alongside its subsidiary, the Impact Credit Guarantee Limited (ICGL).
The World Bank noted that Nigeria’s MSMEs form the backbone of the economy, accounting for most businesses, nearly half of the GDP and a large share of jobs, yet they face barriers to formal finance. “Fewer than one in 20 MSMEs have access to bank credit; loans are often short-term and costly; and collateral requirements exclude many viable firms. Women-led enterprises, which make up a substantial portion of MSMEs, are disproportionately affected, facing higher rejection and limited tailored products,” the bank stated.
The global bank also lamented that “agribusinesses, central to food security and rural livelihoods, similarly struggle to obtain longer-tenor financing for equipment, processing, storage and logistics.” We welcome the World Bank $500million intervention fund and call for a seamless disbursement of the credit facility to ensure that they get to the targeted MSMEs, especially women-led enterprises, agribusinesses and others. We believe that FINCLUDE will resolve the funding challenges of MSMES and create more jobs. Let the DBN and its subsidiary, ICGL, ensure that the funds are diligently disbursed and judiciously utilized.
