
Dr. Ikyanyon
In the bustling markets of Lagos, the industrious streets of Kano, and the vibrant communities across Nigeria, small and medium enterprises (SMEs) are the heartbeat of our economy. They are the cornerstones of employment, innovation, and growth. However, these businesses are facing a storm of challenges in these turbulent economic times that threaten their survival and prosperity, which makes building resilience in our SMEs more critical than ever.
Nigeria’s SMEs, which account for 96% of businesses and 84% of employment, are at the frontline of our economic battles. However, recent statistics paint a grim picture. A staggering 45% decline in the number of small-scale industrialists operating in the country has been noted over just two years, dropping from 246,200 in 2020 to 170,098 in 2022. This decline is a stark reminder of the harsh economic realities many of these businesses face, including high inflation, currency instability, and access to capital.
The challenges are manifold. According to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), four out of every five SMEs fail before their fifth anniversary, largely due to a harsh economic environment, lack of access to capital, and poor business practices. The economic environment has grown even more hostile with the removal of fuel subsidies, soaring inflation rates touching 34.6% in November 2024, and food inflation reaching around 40%. These factors not only increase operational costs but also dampen consumer purchasing power.
Yet, within these challenges lie opportunities for resilience. Here’s how we can fortify our SMEs:
1. Access to Finance: One of the primary hurdles for SMEs is obtaining affordable financing. The government must amplify initiatives for easier access to loans with favourable terms. Programmes like the N50,000 trade grant to small businesses are steps in the right direction, but more is needed. Financial literacy programmes can empower business owners to make informed decisions about finance.
2. Infrastructure Development: The state of our infrastructure, particularly power supply, is a critical bottleneck. SMEs often rely on costly alternatives like generators, which significantly cut into profit margins. The government’s commitment to improving transportation networks and power delivery is vital. Projects like the Eastern Rail Line could catalyse economic activity by improving the logistics for SMEs.
3. Diversification and Innovation: The Nigerian economy’s heavy dependence on oil has been a lesson in vulnerability. SMEs should focus on diversifying their products and services. The adoption of technology, especially in digital marketing and e-commerce, can open new markets and reduce dependency on physical retail. The increase in social media users in Nigeria provides a golden opportunity for SMEs to reach a wider audience cost-effectively.
4. Building Networks and Collaborations: Isolation can be the downfall of many SMEs. Engaging with business networks, participating in industry associations, and collaborating with other businesses can foster a support system. These connections can lead to shared resources, knowledge, and even collective bargaining for better rates on supplies or services.
5. Policy Advocacy and Support: SMEs need a voice in policy-making. There’s a pressing need for policies that specifically cater to the unique needs of small businesses. This includes tax reforms, reducing bureaucratic red tape, and ensuring that local government levies aren’t overly burdensome. The Nigerian government’s recent economic reforms have shown promise in increasing revenue, which could be redirected to bolster SME growth.
6. Resilience Through Sustainability: Embracing sustainable practices is not just good for the planet but also for business resilience. By reducing waste and optimizing resources, SMEs can lower operational costs. Moreover, consumers are increasingly valuing sustainability, which can become a unique selling proposition for businesses.
7. Risk Management: SMEs must develop a culture of preparedness. This involves not only having contingency plans for economic downturns but also regularly assessing risks related to market changes, natural disasters, or political instability. The ability to pivot quickly in response to these risks can make the difference between survival and failure.
8. Skill Development and Education: Empowering SME owners and employees with skills is fundamental. Programmes aimed at upskilling Nigerians in digital and technical competencies can harness our demographic dividend. The government’s National Skills programmes are a step towards inclusivity, but more focus on vocational training tailored for SME needs is essential.
The path to resilience isn’t easy, but it’s not impossible. The stories of SMEs surviving or even thriving amidst adversity are numerous. From the tailor in Ibadan who switched to online platforms during lockdowns to the agribusiness in Jos diversifying crops to counter climate change, these narratives are a testament to Nigerian ingenuity.
The economic environment of Nigeria is changing, with President Bola Tinubu’s administration focusing on economic diversification. However, the real test of these policies will be how effectively they trickle down to support our SMEs. The government’s commitment must translate into actionable, sustainable support for these businesses which are the backbone of our economy.
As we stand in early 2025, with the echoes of economic reforms and policy changes resonating, it’s clear that resilience for Nigerian SMEs isn’t just about surviving; it’s about thriving. It requires a collective effort – from policymakers crafting supportive environments to SMEs themselves adopting proactive strategies. Let’s build a Nigeria where SMEs not only weather storms but sail through them, stronger and more robust, contributing to a vibrant, inclusive economic future for all.
- Dr. Darius Ngutor Ikyanyon, a Senior Lecturer in the Department of Business Management, Benue State University, Makurdi, can be contacted via: [email protected].