Ahmed Williams: The Travails of Small and Medium Enterprise Ownership in Nigeria

A recent World Bank Ease of Doing Business Index showcased how frustrating it is to own and operate a small and medium enterprise business in Nigeria in the 2015 Doing Business Index. The relative link between SME’s, economic growth and poverty alleviation cannot be overstated with regards to enhancing a robust economy.

Thus, one important policy review for the new political administration in Nigeria might lie in the role of government effort to help improve the state of free enterprise in the economy towards enhancing a sustained growth of the national economy. This might be considered a priority endeavor in light of recent ministerial appointments in which the current administration is currently deliberating upon.

In a working paper titled SME’s, Growth and Poverty (Beck, Demirgüç-Kunt and Levine, 2005) published by the National Bureau of Economic Research it is shown that SME’s exert a relative impact on economic growth and which inevitably according to the author of this article contributes to sustained and an enhanced middle class in the Nigerian economy.

However, reflecting on the World Bank Ease of Doing Business Index, there arises the need to itemize the current difficulty encountered by SME operators in the smooth running of their businesses in Nigeria.

Registering a business in Nigeria with Lagos as a case study takes an estimated NGN15,000 plus a 0.75% stamp duty according to the WB report. Yet, another NGN 454,475 plus a development permit from the Lagos State Physical Planning Permit Authority (LASPPPA) in the value of NGN 7,100,616 is needed to obtain construction permits.

Nonetheless, an aspiring SME’s owner still has to go through the hurdle of obtaining state-provided power supply totaling millions of Naira inclusive of a purchase and external equipment connection and installation totaling about NGN 1,559,250 plus an inspection certificate to Eko Electricity Distribution Company totaling about NGN 575,000.

Yet, it doesn’t end there. There still exists the bureaucratic gridlock of registering the company which takes a few months with its associated costs. Then there is the cost of tax obligations and the difficulty of cross-border trading.

Question is why do we make it so incredibly hard for those involved in contributing to the economic growth and development of our economy through all these costs and lengthy state enforcement procedural delays?

As the current democratic regime settles in, this might be an important issue worth looking into. The cited report ranked Nigeria at 170th out of 189 sampled national economies. The difficulty encountered in this endeavor culminates in the desire of many potential small business entrepreneurs from considering going through the many obstacles in registering their business while enduring the inherent challenges in maintaining a functional business endeavor.

The reformation of the business environment poses an important influence on the development of the private sector and by extension the creation of jobs and better livelihoods as aptly reported in this report. With a relative ease of doing business, many more people will be taken out of the unemployment market while many more families will benefit from the many employment opportunities. With a concerning current unemployment rate of about 7.5% according to the National Bureau of Statistics, a reformed business sector will pave way for reduction in crime, interest in pursuit of higher education and an eventual increase in the level of enlightened citizenry.

One might be forgiven to agree with certain public opinion leaders who have consistently lamented the state of unemployed youths and rightly backed by international research institutions through empirical analysis. Thus, an effort to improve on the ease of doing business in Nigeria could have a multifaceted positive effect on the many hydra-headed challenges of poverty, insecurity and a much more enlightened citizenry within the polity.

I do hope President Buhari takes this into paramount consideration as he selects his lieutenants in his rejuvenating effort of the entity called Nigeria. It is imperative that those who will be responsible for the economic development in his team pay serious attention to the role of SMEs towards a sustained economic growth, robust middle class and improved security in the entity.

In summary, it is worth noting that “the wealth of a nation is to be measured then, not by the power of its rulers or the bullion in the state treasury, but by the access to wealth on the part of any randomly chosen member of it” (Tom Palmer, 2014). An improved ease of doing business I believe is capable of making such effort a reality.

Photo:Olaoluwa Rasheed is the CEO of Nigeria’s Bank of Industry, supporting SMEs with loans