Although it may not look like it at first glance, MSMEs play a major role in the economy of Nigeria, as well as other economies around the world. Essentially, it provides more employment to the public, and are also more than the total number of large corporations around the world. Therefore, MSMEs are very important for the economy, given this vital position it holds.
Also, research has shown that MSMEs are responsible for creating innovations and driving competition in the economy. Therefore, they play a very vital role. In a country like Nigeria, they are mostly owned and operated by sole proprietors, although some run like large corporations. This article looks at the overall status of MSMEs, and the role they play in the country.
What is the meaning of an MSME?
Basically, MSME is an abbreviation for micro, small and medium businesses, however, its exact definition could vary in other parts of the world. More so, an MSME is classified as such, when the number of employees is less than 250. Beyond 250, we could call it a large corporation. The breakdown of MSMEs according to numbers of employees are:
- Micro enterprises: employees between 1 and 9 in number
- Small enterprises employees between 10 and 49 in number
- Medium enterprises: employees between 50 and 249 in number
How do MSMEs drive economic growth in Nigeria?
The economics of developing and developed countries rests on the shoulders of MSMEs. This is so because of their innovative nature, efficiency, employment share, and constant strive towards progress. Essentially, MSMEs dynamisms allows a rapid decision making process that affects staff and the economy at large. Also, MSMEs form a large portion of the business in a country like Nigeria, therefore, they can be referred to as its engine room.
Some of the ways that MSMEs drive economic growth in a country like Nigeria are:
- They create a breeding ground for entrepreneurs and managerial talents as there is limited space for these in large corporations. Therefore, they create a way for economic development.
- MSMEs train and grow their employees into skilled and semi-skilled workers to prepare them for future industrial expansions. Therefore, in doing this, they create more skilled labour for the economy.
- Their business and employment create a medium for reducing income disparities among labour in the economy
- They create employment opportunities at a relatively low capital cost, therefore reducing unemployment in the country
- MSMEs contribute to the overall production of goods and services in the economy
- They adopt risky and appropriate approaches, therefore giving opportunity for other corporations to implement the same, seeing that it works.
- They improve the link between the economic, geographic, and social sectors of the economy.
What is the population of MSMEs in Nigeria?
According to data gathered and compiled by the Ministry of Industry, Trade and Investment, Nigeria currently has over 37.07 million MSME enterprises. Also, putting that in context, they account for more than 84% of jobs in the country. Looking at more data, the ministry also claimed that MSME enterprises also account for 7.27% of goods and services exported, and 48.5% of gross domestic products (GDP).
MSMEs funding in Nigeria
MSME is short for micro, small and medium enterprises, which is an initiative set up by the federal government of Nigeria through the Central Bank of Nigeria. It was launched in 2013, on the 15th of August 2013 with a share capital of N220 billion and basically tends to finance micro, small and medium enterprises in the economy. Essentially, MSMEDF helps fix the existing huge financial gap between small businesses and the big boys. It is one of the best business grants in Nigeria.
Also, ten percent of the micro, small and medium enterprises development fund (MSMEDF) is devoted to developmental causes such as capacity building, admin costs, and grants. The remaining 90 per cent focuses on financing commercial projects for participating financial institutions (PFIs) at a maximum interest rate of 9% per annum. In addition, only a select industries qualify to benefit from this fund. Eligible areas include:
- Trade and commerce
- Cottage industries
- Agricultural value chain
- Income-generating businesses as prescribed by the CBN from time to time
What are the objectives of the MSME funding?
The overall objective of the MSME funds is to provide low-interest finance to businesses in the Nigerian economy through PFIs. However, a breakdown of its objectives are:
- Engender inclusive growth
- Increase productivity and overall output of microenterprises
- Enhance MSMEs access to financial services
- Increase employment and create wealth
MSMEs are one of the foundational pillars of the economy of Nigeria. Essentially, they are the unsung heroes in employment rate and economic development which is why the government aims to support them. Also, you can benefit from this fund by applying to any participating financial institutions around you.