In emerging nations like Nigeria, small and medium-sized businesses (SMEs) are the main contributors to economic expansion and job creation. It is crucial to identify the issues preventing the SME growth in Nigeria.
The premise that both internal and external factors are important success predictors of SMEs in Nigeria is supported by empirical evidence from a report on SME growth in Nigeria.
The profitability of SMEs was found to be negatively and negligibly correlated with marketing techniques. To remedy the glaring gap in institutional efficiency and infrastructure, both the public and private sectors must take policy initiatives.
The nature of SME growth in Nigeria
It is generally known and recorded that SMEs are present in almost every sector of the Nigerian economy, and that they play an important role in the growth of the country.
These include increasing industrial base diversification and growth, using local resources and labour, increasing government revenue, wealth creation, eradicating poverty, and reducing rural-to-urban migration, among other things.
The economic needs of SMEs can also be seen in the mobilisation of unused financial resources, the fostering of competition through the provision of a variety of goods and services.
It can also help in the easing of pressure on the demand for foreign exchange through import substitution, the provision of intermediate services and supplies to large firms, the creation of jobs, the stimulation of innovation, etc.
Fostering SME growth in Nigeria
The Small and Micro Enterprise Development Agency (SMEDAN) and the Bank of Industry, for example, which were founded to offer technical support and low-interest loans, are just two of the numerous programmes and organisations that the Nigerian government and private businesses have created.
Commercial banks are required by the Small and Medium Enterprise Industries Equity Investment Scheme (SMIEIS) to invest at least 10% of their pretax profit in SMEs. The 220 billion naira SMEs intervention fund was established in 2014 by the Central Bank of Nigeria (CBN).
Unfortunately, despite the enormous amount of work put in by various governments and other stakeholders, the majority of newly founded SMEs fail to survive their first two years, while those that are already in existence are either closing down or performing below-par.
Thompson and MacMillan authors of Business Models: Creating New Markets and Societal Wealth, supported this claim by saying that “There is a significant failure rate for new businesses.
Uncertain prices and costs, a lack of or unreliable infrastructure, and unpredictable competitor responses are only a few of the difficulties that new businesses in emerging economies must overcome “.
Due to the high rate of SME mortality, it is important to examine internal operational effectiveness and efficiency as well as comprehend the complex external environmental factors that may limit a SME’s flexibility and ability to seize business opportunities that are necessary for growth and profitability.
Nigeria’s massive population provides a sizable market for SMEs to tap into, and the business environment undoubtedly presents a number of intrinsic difficulties for SMEs to overcome.
The successful management of human resources, finances, and marketing has been cited as one of the requirements for SMEs. Other requirements include the nature of the regulatory and legal framework, business support services, and infrastructures.
Other things found to have an impact on SMEs’ success are the size, age, and location of the company, together with the entrepreneur’s gender, educational background, age, managerial aptitude, and experience, which can be roughly categorised as business and entrepreneurial qualities.