Lagos State Governor Babatunde Fashola Tuesday said the poor structure of small and medium scale enterprises (SMEs) in the country was responsible for the inability of the sector to contribute significantly to the growth of the economy.
Fashola stated this in an address presented at the maiden edition of the First Bank of Nigeria Limited SMEConnect conference titled: “SMEs at the Heart of National Development: Creativity, Capacity and Capital,” held in Lagos.
The governor expressed concern that SMEs in Nigeria had not performed to their full potentials. To this end, Fashola argued the vital and vibrant roles SMEs play in the economic growth and development of other countries was yet to reflect in the Nigerian economy.
“Most of the challenges the SMEs face arises from the need to have a mode of operation of the enterprise. Some of these challenges include lack of effective policies or appropriate legal framework, financial constraints and access to credit, poor infrastructure and most especially, unstable power supply, lack of skilled labour and poor ethical conduct.
“In most cases, our SMEs routinely operate outside the normal structure of the economy; they ignore extant laws and regulations and continued to be somewhat indifferent to changing trends both domestically and globally. It is therefore not surprising that the survival rate of SMEs have continued to be abysmally low. In my view, this essentially accounts for the pervasive level of unemployment we still record in Africa,” Fashola, who was represented by the Commissioner of Finance, Lagos state, Mr. Ayo Gbeleyi said.
However, the Lagos state governor described the SME sector in any nation as the main driving force behind job creation, export earnings, poverty reduction, wealth creation, income redistribution and reduction in income inequality.
“SMEs contribute to a more efficient allocation of resources. They tend to adopt labour intensive method and support the development and diffusion of entrepreneurial spirit and skills and helps in reducing economic disparity between rural and urban areas,” he added.
Earlier, the Group Managing Director/Chief Executive Officer, First Bank, Mr. Bisi Onasanya, expressed optimism that the conference would contribute effectively in situating Nigerian SMEs in their rightful position.
According to the United Nations Industrial Development Organisation (UNIDO), SMEs have a significant role to play in economic development. The SMEs forms the backbone of the private sector; they make up over 90 per cent of enterprises in the world and account for 50 to 60 per cent of employment. They also play an important role in generating employment and poverty alleviation. According to the National Bureau of Statistics (NBS), the total number of SMEs in Nigeria is over 17 million.