by Albinus Chiedu

Economists have over the years blamed the persistent high unemployment rate in Nigeria on the violation of the principle of economic development that holds in high esteem the impact of Small and Medium Scale Enterprises on national economic development.

As at 1974 and 1978, people without basic education accounted for over 76 per cent of the unemployed in Nigeria. Today, the situation has been seriously compounded by the regularly increasing number of unemployed university graduates. According to the Statistician-General of the Federation and Chief Executive Officer of the National Bureau of Statistics, Dr. Yemi Kale, the total number of unemployed Nigerians rose from more than 12 million in 2010 to over 14 million in 2011, with the figure increasing by 1.8 million between December 2010 and June 2011. He added that unemployment was highest among people aged between 15 and 24, and 25 and 44 years. The NBS data also show that over 22 million of the active population are either unwilling or unable to work or are working for less than 40 hours per week on the average. This is to say the least, disturbing for a country that has multiple resources to be counted among the world economic powers. Ironically, There is a very large youth bulge with over 70.2 per cent of the population living below the poverty line of $1 per day.

In the past few decades, there has been a shift in approach to improvement of economic growth by countries. For instance, Nigeria for a long time, so depended on its natural resources that oil became a centre of controversy. Today, new trends have emerged. The most revered countries in the world are no longer those that were respected because of natural resources like oil. Countries with greatness and prospects of greatness are the ones peopled by those who use their minds; those who trade ideas and products of ideas; people who constitute the wealthiest people in the world today; people like Bill Gates who started his business very small and eventually became a positive force in the economy of his country.

There is therefore an urgent need for managers of Nigeria’s economy to increase attention to SMEs and re-emphasise their importance to national economic development by providing conducive environment for the creation of new ones and furthering the strength of existing ones.

Amidst the reforms that have been going on in Nigeria’s financial sector in recent years, access to bank credits has been a major challenge to willing investors and creative minds that are supposed to constitute drivers of SMEs. It is important for financial institutions to realise that unless all barriers between intending buyers and sellers of products and services are removed, the viability of the financial system itself cannot improve and building a private sector-led economy will remain a mere dream.

A small scale business or micro-business requires a small amount of capital to establish it and usually has a few number of employees. In most cases, it is personally handled by the owner. SMEs constitute over 90 per cent of total enterprises in most economies with a high rate of employment growth. They constitute a vehicle for increased industrial production and exports. For example, in America and EU countries, it is estimated that SMEs contribute about 60 per cent in employment, 40-60 per cent to Gross Domestic Product and 30-60 per cent to exports. The Asian countries of China, Indonesia, India, Malaysia, Japan and South Korea also have impressive SME sectors contributing between 70 to 90 per cent of employment with about 40 per cent contribution to their respective GDPs. It will be difficult therefore, to rebuild the Nigerian economy if the role of SMEs as important employment and economic growth drivers is not redefined.

The issue of unemployment will be more strategically tackled when 50,000 small businesses with each employing five workers than when a large organisation hires 5,000 workers. Besides, SMEs are shock absorbers in times of economic recession as most recently experienced throughout the world. As big corporations lay off workers in times of economic uncertainties, most SMEs continue to operate as their businesses require few staff and cannot run lower than low level businesses that they already are.

Lack of government incentives, inadequate information about foreign business opportunities, access to working capital as well as prevalent ignorance on principles of entrepreneurship constitute major challenges to the development of SMEs in Nigeria. These challenges require the political will and commitment of stakeholders to resolve.

The major challenge to the success of SMEs in Nigeria is irregular power supply which requires urgent genuine government attention if the Vision 2020 project is to be achieved. According to the Governor of Central Bank of Nigeria, Lamido Sanusi, “We will create new industries with power. The small scale industries we are talking about cannot survive without power.”

*Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija. This piece was originally printed in Punch on June 5, 2012.