…Experts urge incentives for formalisation as lenders cite documentation gaps limiting MSME credit
Nigeria needs updated data on micro, small and medium-sized enterprises (MSMEs) to guide policy decisions and improve access to finance, as the country’s estimate of 39.5 million businesses is based on data from 2020, John Owan Enoh, minister of state for Industry, Trade and Investment, has said.
Enoh, who spoke during a panel session on MSME and the Informal Economy at the 32nd Nigerian Economic Summit in Abuja, said the absence of current data was undermining efforts to design effective interventions for small businesses, which account for the vast majority of businesses in the country and a significant share of employment.
He said MSMEs needed to be integrated into the value chains of large manufacturers and other businesses, while the government should make formalisation more attractive rather than treating it solely as a compliance requirement.
“I think that the more we’re able to link up these MSMEs, you know, to big manufacturing and all of that, the more they’re able to have some kind of steady source of supplies, and all of that. And the only way they can achieve that is how you get them linked up to manufacturing and to all of that. So the more we do that, the better for us as a country.
“You know, the data that we have today, we’re talking about 39 million MSMEs. It’s a data that has stayed on as a data for about six years, 2020. So we can’t continue to build on data that was created about six years ago. We need to be able to do a census of when we talk about MSMEs, who are we really talking about? What is the present state of the number? ,” he said
Enoh said the federal government had introduced measures to reduce the cost of formalisation and improve access to finance, including waivers on Corporate Affairs Commission registration costs for 250,000 MSMEs through an initiative involving the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
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He also cited Nigeria’s tax policy, which exempts companies with annual turnover below N100 million from company income tax, as an incentive intended to ease the burden on smaller businesses.
According to him, formal registration and access to relevant documentation, including tax identification, can help businesses qualify for loans and other support programmes.
However, many small businesses remain informal and struggle to meet the documentation requirements attached to intervention funds, limiting their ability to benefit from government-backed financing.
Enoh said MSMEs also faced high energy costs and limited access to affordable, long-term finance. He noted that although intervention programmes had been established to support businesses, smaller enterprises often found it difficult to satisfy the requirements for accessing the funds.
He cited a N200 billion intervention fund that included a N5 billion allocation for MSMEs, saying businesses without adequate records and formal structures could struggle to access such support.
SMEDAN, he added, had about N12 billion in soft loans available at interest rates of between 7 and 8 percent.
The minister argued that formalisation should be accompanied by practical benefits, including access to finance, markets and business opportunities, rather than being driven mainly by regulatory demands.
Olusegun Alebiosu, group managing director and chief executive officer of FirstBank, said MSMEs were too broad a category to be addressed through a single financing model, urging policymakers and lenders to develop interventions suited to businesses at different stages of growth.
“We have so many different initiatives attacking or overlapping the matter when it comes to MSMEs. And there’s some expectations that may be misaligned. So even from a banking perspective, when we hear the word MSMEs, that’s so broad. Like the needs of a micro enterprise or a petty trader is very different from a chain of fast food restaurants if you think about how different they are in terms of what they do, the structure you would expect out of them.
“So there needs to be more tailored engagement and the different parts of the country, whether it’s across public or private sector, need to understand where their role starts and stops,” he said
He said banks operated as commercial institutions and needed to assess the viability and cash flow of businesses before extending credit, rather than relying solely on collateral.
Alebiosu said FirstBank had introduced products designed to meet different business needs, including First Gear and FirstGem for women-owned enterprises, First Trader Solution, which offers financing based on account activity without collateral, and FirstCredit for short-term working capital.
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He said the bank had disbursed more than N1 trillion through FirstCredit since the product was introduced.
Alebiosu called for stronger coordination among policymakers, commercial banks, microfinance institutions and development finance institutions to ensure that support reaches businesses that need it.
“So sometimes I hear it a lot around what banks need to do to expand SMEs. They’re not charity organizations, right? You have government there for a reason as a backstop and as the policy creator and to guide that direction. And once government gets that right and continues to do so, we’re seeing some improvement. Then we can lend with some level of assurance that we are going to get our monies back,” he added
Funabashi Gaku, an economist and fellow in small and medium enterprise development at the Japan International Cooperation Agency (JICA), said SME policies should clearly identify their target groups and be adapted to local economic conditions rather than copied wholesale from other countries.
He noted that policies for small businesses had both economic and social objectives, making it important for governments to define the problems they intended to solve and tailor support accordingly.
Oluyemisi Obe, chief executive officer of Prothrive Astute Heights, said support for MSMEs should evolve as businesses grow, with different categories requiring different forms of assistance.
Obe also called for policies to be translated into laws and sustained frameworks to ensure continuity beyond announcements and policy documents.
Participants at the session further identified weak coordination between federal and subnational governments, limited access to markets and a difficult business environment as constraints on MSME growth.
They called for improved business data, better alignment between MSME and industrial policies, stronger public-private partnerships and reforms to reduce the burden of permits, land documentation and contract enforcement.
The speakers said government support should go beyond providing loans to include helping small businesses secure markets, participate in public procurement and supply larger manufacturers.
They argued that linking MSMEs to established value chains could help them expand production, improve their business records and become more attractive to lenders.
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