Small and Medium Enterprises have been around for as long as humans have learnt to trade. However in the last few decades, SMEs have grown in scope beyond being father and son/mother and daughter business units to become bedrock of economies all over the world. According to Investopedia, even in an industrialized economy like the US, Small and Medium Businesses comprise more than 99% of all firms. They also contribute to 43.5% of the GDP and pay 39.7% of the entire U.S. private payroll. Furthermore, in spite of the massive conglomerates and tech LLCs that have emerged in the US since the 90s, Small businesses have still created 4.8 million more new U.S. jobs from 1995 to 2020 compared to large businesses. Similarly in Canada, majority of businesses are SMEs and they contribute an estimated 43% of all Canadian exporters.
The trend is the same in emerging economies. In Nigeria for example, SMEs contribute an estimated 48% to the country’s GDP.
Even from the mere percentage of their financial contribution to the economy, it is obvious that having a thriving SME sector is important to sustaining the growth of an emerging economy. This is especially true in a country like Nigeria, where there is a heavy dependence on SMEs to prop up the country’s economy because the conditions for the evolution of a large-scale industrial and manufacturing economy, found in more advanced countries like the USA and China, are still not in place.
Beyond that, SMEs are instrumental in tackling unemployment challenges. They serve as engines for job creation, absorbing a considerable portion of the labor force, especially the youth. The ripple effect of the increase in SMEs on local communities is evident, as they foster economic resilience and stability while also signaling a reduction in crime rates. Furthermore, in an increasingly connected digital world, SMEs are hotbeds of innovation, propelling Nigeria towards technological advancement.
From technology startups to local manufacturing units, these enterprises continually drive progress, going into territories that bigger brands are afraid to step into and making Nigeria a hub of creative solutions.
Unfortunately, as much as the impact of SMEs on the economy is being felt, there is general agreement that SMEs should be doing more and that failure to perform up to potential is due to some challenges they face. Of course, the most common challenge that analysts identify when talking about SMEs is with the government. They talk about the government not creating the right funding opportunities for SMEs and also not establishing policies and infrastructure to support SME growth.
While these issues are obviously challenging enough, a major issue that SMEs face that doesn’t get the required attention is that they also suffer from poor management skills in both their internal and external processes, which is a result of a lack of adequate training and education. This is why the business failure rate for SMEs in Nigeria remains high. If governments at all levels want SMEs to take their rightful place as a core pillar in economic development, then they must be ready to invest money in sustainable and continuous learning for SMEs.
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However, beyond the government itself, SME founders must take personal capacity building very seriously. Many SMEs will do a lot better with capacity-building training in areas like using tech tools for business processes, developing soft skills for their staff, training in leadership and management, and so on. The government can also contribute in this regard by creating facilities for sustainable SME education as well as engaging brands within that niche.
At Edgetechies, we believe that SMEs can become a driver of economic progress in Nigeria with the right training, and we have worked with different brands on various capacity development programs. That is why we have a number of capacity-building solutions tailored towards SMEs. Visit our website to check out our capacity-building solutions.
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