Economic recovery and MSMEs: FG’s big plans for sector revamp

A few weeks ago, the Nigerian government released a blueprint towards reviving and growing the economy. The blueprint, christened Economic Recovery and Growth Plan (ERGP) aims to restore growth, invest “in our people,” and build a globally competitive economy, to which the Micro, Small and Medium Enterprises (MSMEs) will play a significant role.

“It is essential to harness the dynamism of business and the entrepreneurial nature of Nigerians, from the MSMEs to the large domestic and multinational corporations to achieve the objectives of this plan,” the federal government said in a document prepared and released by the Ministry of Budget & National Planning.

According to the federal government, “MSMEs currently account for about 50 per cent of GDP, up to 84 per cent of employment and 7.27 per cent of export earnings. In spite of their important contribution, they face a number of constraints including inadequate access to finance, weak infrastructure, limited access to markets, multiple taxation, limited use of modern technology and a sometimes difficult regulatory environment.

“The ERGP will prioritise MSMEs in all key sectors to make them a major source of growth and contribution to long-term national development. The federal government says it will support MSMEs to maximise their contributions to growth, employment creation and export earnings; increase MSMEs’ contribution to export earnings from 7.27 per cent to a minimum of 15 per cent by 2020.”

The federal government’s strategy include: to provide dedicated infrastructure and common facilities to MSME clusters, reduce regulatory obstacles facing MSMEs, through more information and structured interface with MDAs, enable financial service providers (e.g., deposit money banks) to grant loans to MSMEs against their pension assets as collateral; enhance access to the N250 billion CBN MSME fund by reviewing its design and implementing enabling initiatives to encourage on-lending, provide micro-loans for women through the GEEP and Women Empowerment Fund; partner with international development banks and the Global Impact Investing Network to promote and facilitate impact investments for MSMEs in Nigeria and to continue to scale up and roll out credit to critical sectors of the economy, in particular by increasing the funding available to the collateral registry.

The plan, according to the federal government, “prioritises the provision of a more business friendly economic environment.” To this end, job creation and youth empowerment plans a critical role in this plan and as such, according to the federal government, “interventions to create jobs are a core part of the ERGP, which aims to reduce unemployment and under-employment, especially among youth.”

Accordingly, “all capacity building and skills acquisition interventions will be targeted at youth-dominated sectors such as ICT, creative industries, and services,” the federal government indicated in the plan. The plan, according to players in the MSMEs sector, offers hope, but they are worried that this may be one of many of Nigeria’s grand plans towards stimulating the economy, despite the federal government’s insistence that “the ERGP differs from previous plans.”

In the instance that federal government would follow through with the plan, those in the MSMEs sector have a few ideas on priority areas for the government. The first is infrastructure, they said. “For me as an entrepreneur in the ICT sector, I feel that it is important that the federal government focuses on investing in infrastructure, as soon as possible. If the government is serious about job creation, improving and growing the economy, it must recognise that digitisation is the way to go and we need infrastructure for that. As you, across the world digitisation is one very important economic driver that accelerates growth and facilitates job creation and we need to do that,” Seun Adegbite, who

According to the World Economic Forum (WEF), digitisation has the potential to boost productivity, create new jobs, and enhance the quality of life for society at large. In fact, it went ahead to say that if emerging markets could double the Digitization Index score for their poorest citizens over the next 10 years, the result would be a global $4.4 trillion gain in nominal GDP, an extra $930 billion in the cumulative household income for the poorest, and 64 million new jobs for today’s socially and economically most marginal groups.

As the federal government plans to revamp the construction sector, one of the effective ways to get that done is through digitisation, some analysts are saying; and if the McKinsey Global Institute estimates that the world will need to spend $57 trillion on infrastructure by 2030 to keep up with global GDP growth is anything to go by, providing an enabling environment for players in the construction industry to effectively improve their productivity would be a good way to start, analyst said.

When Segun Aderonmu, a small business owner in the service sector was asked what improving the business environment meant to him, he responded that: “I want to be able to run my business in a more cost efficient manner. Can you imagine how much I spend on fuel every day? N3,000! That’s how much I spend to buy 20 litres of fuel to run my business every day. That is beside other overhead costs. You can imagine how much I spend in a year at this rate. I want the federal government to provide needed infrastructure in making sure that we the small business owners are able to stay in business.”

The strengthening of small-scale businesses & the promotion of industrialization are priorities for economic recovery. Nigeria’s manufacturing sector has been particularly vulnerable to the stagnant economic conditions. One major strategy is to accelerate implementation of the National Industrial Revolution Plan (NIRP) through Special Economic Zones (SEZs).

The focus will be on priority sectors to generate jobs, promote exports, boost growth and upgrade skills to create 1.5 million jobs by 2020. A revitalized manufacturing sector will create jobs, stimulate foreign exchange earnings and grow micro, small and medium enterprises (MSMEs).

The involvement of small businesses in the service sector is a major lever for economic recovery. The service industry accounts for 53 per cent of GDP and contains key sectors that can contribute to short-term economic growth and longer-term structural change. While the telecommunications and information and communications technology services (ICT) sector grew in absolute terms by 9.26 per cent in Q3 of 2016, it offers huge scope for further growth, especially from opportunities in the digital economy.

In addition to sector-specific growth strategies, the ERGP will implement cross-sector strategies to support Nigeria’s entrepreneurs and businesses. These will include enhancing support for MSMEs, boosting development finance and implementing a clear export development strategy for non-oil sectors.