SMEs Says a Recent Economist Intelligence Unit Report

Small and medium enterprises (SMEs) in Nigeria, including textile and clothing firms, face several challenges—access to finance, rickety infrastructure, patchy energy supplies and security concerns, says a recent Economist Intelligence Unit report.

“SMEs are also affected by problems beyond national borders, such as the flood of illegal textile imports that has devastated a once-flourishing indigenous industry,” states the report titled ‘Enabling a more productive Nigeria: Powering SMEs’.

“Nigeria is now Africa’s leading economy, overtaking South Africa last year to become the continent’s largest nation in terms of GDP. Its commercial capital, the mega-city of Lagos, has surpassed the Egyptian capital, Cairo, to become Africa’s biggest city in terms of population. Combined with favourable demographics and a rising middle class, the country is now an investment hotspot for some of the world’s largest brands,” according to the report.

However, to take its rightful place among the world’s top emerging markets, Nigeria must overcome a series of obstacles, which include economic diversification, job creation and a more effective conversion of growth into what matters most: rising incomes for the country’s 173 million citizens.

There is a vast network of SMEs in Nigeria and increasing productivity of these SMEs would go a long way in enabling Nigeria reach its development goals.

Talking of textile SMEs, the report terms illegally imported Chinese-made fabrics imitating Nigeria’s signature prints as a big threat. Despite importing such textiles is illegal, these imports comprise 85 per cent of the market.

Dilapidated textile factories in the country’s northern city of Kaduna are what remain of Nigeria’s most important manufacturing industry, which in its heyday employed 350,000 people. The World Bank estimates that textiles smuggled into Nigeria through Benin are worth US$ 2.2 billion a year, compared with local Nigerian production, which has dropped to US$ 40 million annually.

“Installing more effective checks to keep out illegal imports would provide a major boon to local (textile) industries,” advises the report.

To support SME productivity, the report suggests that Nigeria’s government must stabilise macroeconomic policy and install a more transparent tax and customs system. It also advises development of light-rail infrastructure and ports, and information and communication technologies (ICT).

To boost formal financing, SMEs must improve their book-keeping and corporate structures, and banks need to hire more SME business experts to inform lending decisions, the report adds.