With a population of 148 million and must largest economy in the continent after South Africa, the state of Nigeria’s economy is a bundle of extreme contradictions. The united states sources 10% of its crude imports from abundant oil fields in the Niger Delta, a region that is also home to one of the largest know natural gas reserves in the world. Despite these natural endowments, Nigeria is crippled with rampant poverty and depressing macroeconomic indicators and human development indices. Unemployment is endemic and more than 54% of its population eats less than $1 on a daily basis. Decades of political turmoil, civilian unrest and large scale government mismanagement are largely to blame for this state of Nigerian affairs.
The return of democracy in 1999 paved the way for economic reforms along with the adoption of an ambitious plan to take Nigeria to the top 20 world economies by 2020. A massive subsequent reprioritisation of economic policy initiatives has brought home tangible results: currency reserves grew fivefold between 2003 and 2006, while GDP growth averaged more than 7%. However, and because of long-standing systemic imbalances, per capita GDP dipped from $444 in 1997 to $430 in 2004, even while poverty levels actually extended.
The bulk of earning has been Nigeria’s overdependence on oil and gas exports that fetched it an estimated $600 billion in the last five decades, but made little difference to the non-oil sector, which floundered from a climate of policy negligence and inadequate financial and technical support. The thrust of Nigeria’s renewed economic objectives must be on entrepreneurship development, taking under consideration its mammoth human resource capability, and in a manner that makes inclusive yet rapidly accelerated economic growth possible. Weaning away attachment to non-renewable resources with the simultaneous promotion of micro, small and medium enterprises (MSMEs) is crucial to achieving both the 2020 objective and Nigeria’s Millennium Development Goals.
MSMEs have been a major contributor to the rapid growth regarding your multitude of economies all around the world, historically beginning with UK and America to gradually Europe, Latin America and lately in considerable parts of South and East Asia. Currently, above what 90% of all enterprises in the world are estimated to be MSMEs, accounting for up to 80% of total employment prospects. In OECD countries, the MSME component is just as high as 97% of total business activity, contributing between 40% and 60% of GDP1 in states. These statistics hide lots of ideas for Nigeria, in the context from the economic development targets.
First among them could be the fact that wholesome MSME growth is fundamental to your expansion of rural economies as part of sustained macroeconomic development. MSMEs comprise a diverse mix of agriculture-based, production, services and trade sectors; classified for the basis of asset value and employee base on the given scale of maximum and minimum scores for both counts. They often represent an extreme variety when it comes to of size and structure, right from rural artisan guilds, through small machine shops to emerging software and IT firms. Effectively by definition dynamic and comprise a wide involving growth-oriented skill sets, with special needs in comparison to its innovative solutions, technology and equipment and knowledge up-gradation. The central requirement to promote them, however, is progress of a viable market becoming with built-in ease of access for small and medium enterprises.
At the policy level, Nigeria has taken proactive steps to promote MSME Registration Benefits in India initiatives, the most notable being a legislative amendment that requires commercial banks operating in the country to set aside 10% of pre-tax profits for investment in smaller enterprises. Both the IMF and World Bank currently run separate outreach programmes to aid Nigerian micro-financing through tailored procedures for streamlining credit evaluation and monitoring micro-loans. The effectiveness of these measures has been borne out to some extent by recent developments.
In June this year, the Nigerian government announced the disbursement of $20 million2 in small-scale industry loans. This is a substantial achievement considering it multiplied out of the $8.4 billion initial World Bank grant to the sector in 2006. Policy makers negotiated the habitually poor access to loan and equity capital in Nigeria with the introduction of latest micro-financial institutions that afforded wider and deeper funding solutions.
Despite this initial euphoria, the overall Nigerian MSME productivity and growth potential remains acutely constrained. Business development services continue to be generally underdeveloped in terms of projected potential, and particularly poor in rural areas outside the major urban focus organisations. Besides inherent infrastructural deficits, MSME growth rates are being further affected by lack of entrepreneurial knowledge, particularly the ability to identify rewarding business occasions.