A new report on Micro, Small and Medium Enterprises (MSMEs) in Nigeria tagged “Country Data Overview: Data from the Small Firm Diaries” has shown that only 8 percent of firms in the agri-processing sub sector received bank loans in 2022.
The report added that 4 percent of the SMEs in light manufacturing, and 4 percent of SMEs in the services sub sector got bank loans in the same period. The Small Firm Diaries’ report was recently published by the National Bureau of Statistics (NBS).
The “Small Firm Diaries” is a global research initiative to understand the role of low-income small firms in poverty reduction, and the barriers to growth and productivity of those firms that limit their contribution to local economies.
The latest report on the state of SMEs in Nigeria provided other vital information on ownership structures, ages of the firms, locations, sectors, and whether or not those SMEs have bank accounts and access to bank loans, with Lagos, Kaduna and Enugu states being the focused areas where SMEs were randomly drawn from agri-processing, light manufacturing and services sub sectors.
Additionally, the report revealed that 91 percent of SMEs in agri-processing have bank accounts; 88 percent of those in light manufacturing have bank accounts, while 96 percent of SMEs in the services sub sector have bank accounts.
When analysed by cities, 91 percent of SMEs in Enugu have bank accounts but only 2 percent were able to obtain bank loans during the period. Also, 80 percent of firms in Kaduna have bank accounts whereas only 7 percent obtained bank loans, while 97 percent of SMEs in Lagos have bank accounts but only 6 percent got bank loans in 2022.
“The Small Firm Diaries was designed to illuminate a class of firms that are little studied and even less understood: firms in low-income communities where owners, employees and customers are likely to be near poverty lines, and that have paid workers (typically a major distinction between types of small businesses in high income countries) but have not yet reached a scale to have professional management (e.g., employees whose only responsibility is managing other employees).
“The Diaries targeted firms that fall in between than those that have been the focus of the global microfinance movement, which are typically firms that do not have (and never grow to have) employees, and those that are more formal, have higher incomes, and are more fully integrated into the financial system and economy. We set a size limit for the firms selected as those that reported having between 1 and 20 employees at baseline,” the report stated.
Data collection in Nigeria for the study began in August 2021 and ended in August 2022. The study initially drew 200 SMEs across the three states and sub sectors, with Lagos State having 89 SMEs, 56 in Kaduna, while 55 SMEs were drawn from Enugu. The final report showed that 161 SMEs participated in the study, implying 80.5 percent response rate.
Of the firms in the light manufacturing sub sector, 36 percent are involved in garment production, 26 percent in leather goods, 18 percent in carpentry, 17 percent in metal works, while 3 percent are categorized as others.
With 38 percent representation, livestock firms dominated those SMEs sampled in the agri-processing sub sector, followed by animal feeds, 23 percent; milling, 15 percent; food preparation, 10 percent; meat and fish preservation, 8 percent, and others, 8 percent.
Printing businesses accounted for 40 percent of SMEs studied under the services sector; followed by household services, 18 percent; private schools, 18 percent; oil pressing, 15 percent; health clinics, 7 percent, and others, 2 percent.
The report further stated that 37 percent of the firms surveyed obtained loans from suppliers, 24 percent from friends, and 23 percent from family while others obtained loans from other sources. In terms of uses, most of them used the loans to make new investments, expand stock or take advantage of an opportunity.
On one hand, men cited cost as the barrier to technology adoption more than women. On the other hand, women listed the skills required as the barrier to technology adoption than men.
In terms of age, 49 percent of the SMEs are at least 10 years old. Also, 17 percent are between the ages of 1 and 10 years; 11 percent are between 5 and 6 years; 10 percent are between 3 and 4 years, while 12 percent are between 1 and 2 years old.
Nigeria is currently facing a huge unemployment crisis with youth unemployment as high as 50 percent. MSMEs make up 96 percent of companies registered in the country, providing 84 percent of the job opportunities. With the nation desirous of diversifying the economy so as to earn more foreign earnings, reviving the nation’s SMEs in the three aforementioned sub sectors of agri-processing, light manufacturing and services will go a long way to reduce the high unemployment situation in Nigeria.
