An Overview of Micro, Small, and Medium-Sized Enterprises (MSMEs) in Nigeria

by Opeoluwa Falodun

MSMEs, or micro, small, and medium-sized businesses, are vital to both the global economy and the Nigerian economy. MSMEs employ many more people than large enterprises and outweigh them in terms of headcount. Considering the sector’s contribution to employment, SMEs are significant for both social and economic reasons.

In several economic areas, SMEs are also credited with fostering competition and innovation. The majority of microbusinesses in Nigeria are frequently run and controlled by lone individuals. We provide a brief summary of MSMEs’ situation in Nigeria and their influence on the national economy in this post.
Depending on the nation and the person defining the words, there are differences in the meanings of microbusiness, small business, and medium business. Micro, Small, and Medium-Sized Enterprises (MSMEs) in Nigeria are essentially defined as businesses that employ no more than 250 people.

The following are the definitions of small and medium-sized businesses:

  • Micro Businesses: those with 1 to 9 workers.
  • Small businesses employ between 10 and 49 people.
  • Medium-sized businesses employ between 50 and 249 people.

Population of MSMEs In Nigeria

Over 37.07 million micro, small, and medium-sized firms (MSMEs) exist in Nigeria, according to the Ministry of Industry, Trade, and Investment. These businesses provide over 84 percent of all jobs in the nation. The ministry further asserted that around 48.5 percent of Nigeria’s GDP and 7.27 percent of the nation’s exports of products and services are attributable to MSME companies.

According to the overall number of MSMEs in Nigeria, small businesses made up 68,168, medium-sized businesses 4,670, and micro enterprises made up the majority with 36,994,578 (or almost 99.8%). The three states in Nigeria with the greatest concentration of MSMEs are Lagos, Oyo, and Kano State.

MSMEs Benefits to Economic Growth

The majority of economies, especially those in emerging nations like Nigeria, rely heavily on small and medium-sized enterprises. This is due to the fact that MSMEs are efficient, innovative, dynamic, and small enough to enable quicker decision-making.

Any economy can readily see the advantages of MSMEs, which include:

  • Contribution of commodities and services produced to the economy;
  • The creation of jobs at comparatively modest capital costs, particularly in the quickly expanding service industry;
  • Offer a means of lowering economic inequality;
  • Provide a workforce with a range of abilities to serve as a foundation for future industrial growth;
  • Strengthen the connections between the economically, socially, and geographically varied economic sectors;
  • Provide people the chance to create and modify suitable technology techniques;
  • Provide a fantastic environment for the development of management and entrepreneurial skills, both of which are critically lacking and may be a major hindrance to economic progress.
  • Since SMEs account for the majority of commercial activity in a developing nation like Nigeria, they are thought to be the engine room for the growth of any economy.

Funding Gap for MSMEs in Nigeria

Financial institutions, industry leaders, and the government have all addressed the issue of MSMEs’ lack of financing. Obtaining the necessary funding to expand and enhance their operations is an issue faced by the majority of MSME enterprises.

The CBN established the MSME Development Fund in 2013 with a N220 billion share capital. The Fund was created in acknowledgment of the substantial economic contributions made by the Micro, Small, and Medium-Sized Enterprises (MSME) subsector as well as the enormous funding gap that currently exists. The Fund’s main goal is to use Participating Financial Institutions (PFIs) to distribute low-interest funds to the MSME subsector of the Nigerian economy.

Also, by offering MSMEs in Nigeria short-term loans, banks and fintechs—financial technology companies—have been bridging the gap in the market. As part of the application process, banks frequently need a lot of documentation, including a business plan. In contrast, Fintechs use data and technology to provide fast and easy access to capital.

The Nigerian government has launched several initiatives and programs in the past and present that are especially aimed at MSMEs, such as SMEDAN, YouWin, TraderMoni, N-Power, etc. When put together, these initiatives represent a significant advancement for MSMEs in Nigeria.

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