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Over regulation killing MSMEs in Nigeria

More facts are still emerging on why Macro Scale & Medium Enterprises (MSMEs) are not growing in Nigeria upon the claims of the government on funding and facilitation/

Several surveys on entrepreneurial activities in Nigeria indicate that most the subsector struggle to survive and cannot compete with their counterparts in other countries due to high cost of doing business.

Only recently, the 2016 World Bank Ease of Doing Business report placed Nigeria in the 169th position out of 189 economies.

Some of the factors used in the report are ease of getting electricity, trading across borders, registering a property, paying taxes, obtaining construction permits, enforcing contracts, resolving insolvency, starting a business, getting credit and protecting minority investors.

Over the years, the country has been consistently placed in the lowest category in the ease of doing business report. In 2010 and 2011, Nigeria occupied the 133rd position. It slipped to 138th, 147th and 170th in 2012, 2013, and 2014, respectively, but occupied 169th position in both 2015 and 2016.

However, the Director, Policy Advocacy and Co-ordination, Small and Medium Enterprises Development Agency of Nigeria, Mr. Monday Ewans, emphasised the need for policy and regulatory framework for the MSMEs.

Highlighting the challenges SMEDAN was facing in performing its role, Ewans said the agency had neither legal backing nor economic resources to support the MSMEs.

According to him, requirements for accessing available funds does not put into consideration the fact that the start-ups fail and want immediate return on investment.

He said, “SMEDAN does not have the requisite capacity to perform its role. The legal issue is very important. SMEDAN cannot say this money is for the MSMEs because the law says we should facilitate access to funds.

“There is no legal framework to interface with the Bank of Industry for access to funds. Our finance partners don’t believe that start-ups sometimes fail. The MSMEs should not be treated like large corporations because their circumstances are different.”

In terms of the capacity of business development service providers, he said that many of them were not credible and aimed to rip off start-ups, adding that curtailing them had been difficult because the agency was not empowered to regulate their activities.

While examining the environment in which small businesses operate during the Fate Foundation’s policy dialogues series, stakeholders involved in the coaching and mentoring of entrepreneurs noted that poor infrastructure and slow response by government agencies saddled with the responsibility of supporting the MSMEs constituted major setbacks to their growth.

Experts pointed out that the growth of the MSMEs was being hampered by unfavourable regulatory environment and lack of collaboration between government agencies supporting small businesses and private sector players.

The Managing Partner, Growth Capital Fund, Co-creation HUB, Mr. Tunde Eleso, said it has been difficult to get investors to support start-ups with viable business ideas because most of them are only interested in return on investment.

While revealing that his group was able to convince some investors including Tony Elumelu Foundation to support 20 entrepreneurs with $10,000 for early experimentation within 18 months, poor infrastructure posed a major challenge.