Performance evaluation of small-medium enterprises (SMEs ...

Bullion Bullion

Volume 21 Number 4 Article 6

12-1997

Performance evaluation of small-medium enterprises (SMEs) in Performance evaluation of small-medium enterprises (SMEs) in

Nigeria. Nigeria.

B S. Adebusuyi Central Bank of Nigeria

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Vol. 21 No. 4 October,/December, 199i

because of the prevalence of in-

formality, performance standards

are almost absent. The Productiontechniques of modern SMEs are

characterised by organised factorytype processing, emploYing rea-

sonably high technology. TheY are

able to employ technical sPecial-

ists to instal equipment and trainemployees.

The ?quity base of SMEs isusually relatively small, while own-

ership and management are oftenheld by one or very few individu-

als as a result of which there isoften greater owner - influence.

The SMEs are also characterised

by concentratioh of and subjectiv-

ity in decision taking, whileemploy er- employee relationshipstend to be informal especiallY in'recognising and correctinginefficiencies.

(c) Roles of SMEsIt has been well recognised that

the technological and organisa-tional revolution now underwaY inthe global economy is not driven

by large capital intensive industrial

firms. It is driven by small and

medium enterprises (SMEs) -

labour intensive in nature, withquick start up times and agile

responses to raPidlY shifting

Adebusuyi, B.S.Research Depaftment,

Central Bank of Nigeia.

PERFORMANCE EVALUATION OF

SMALL-MEDIUM ENTERPRISES (SMEs)

IN NIGERIA

ByAdebusuyi, B.S.'

Research Department,Central Bank of Nigeria.

The flexibility, adaptability and

regenerative tendencies of theSMEs to propel economic devel-

opment have made the sub-sector

a pivotal focus for Governmentindustrial development efforts. The

SME sub-sector is seen as the bed-

rock of industrialisation based onits expected impact and Potentialcontribution towards a diversifiedproduction base. Its accelerative

eI{ect in achieving macro objec-

tives such as full employment, in-

come distribution, development of

locai technology as well as diffu-

sion of management skillb and

stimulation of indigenous entrepre-

neurship have been well docu-

mented in economic develoPment

literature.This paper attempts to evalu-

ate the performance of the SME

sub-sector in view o{ both the gen-

eral and specific government de-

velopmental strategies.and policies

channelled to the sub-sector. Thepaper is structured into five sec-

tions. The first section reviews the

definition. characteristics and roles

of the SMEs. Section II discusses

Government policies for the Pro-motion of SMEs. An evaluation ofthe performance of the sub-sec-

tor is undertaken in Section III'

Outstanding problems of theSMEs are outlined in section IVwhile section V summarises and

concludes the paper.

, SECTION IDEFINITION, CHARACTER-

ISTICS AND ROLES OFSMEs

(a) DefinitionProbably due to differences in

policy focus, different government

agencies in Nigeria, such as theCentral Bank of Nigeria, the Ni-gerian Bank for Commerce and

Industry, the Centre for Industrial

Research and Development(CIRD) and the NationalEconomicReconstruction Fund (NERFUND)

used to apply various definitionsfor SMEs. However, in 1992,theNational Council of Industries at

its meeting in Sokoto agreed tostreamline the various definitionsin order to remove ambiguities. It

defined SmallScale Enterprises as

those with fixed assets above N1

million but not exceeding N10 mil-

lion, excluding land but including

working capital. The NCI also de-

fined Medium Scale EnterPrises

are those with {ixed assets exclud-

ing land but including workingcapitalof over N10 million but notexceeding N40 million.

(b) CharacteristicsThe SMEs are characterised bY

production of traditional consumer

goods, particularly footwear,leather products and food Prod-ucts, metal working, textiles etc.

They are closely attached to Prod-ucts that launched them and

Adebusuyi, NC.B.Research Abujain lndustrialthe Office, Department,EconomistB. isS, Seniora Studies

46

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Vol 21 No 4

markets and technoiogies (World

Bank, 1995). SMEs retain a

competitive advantage over large

enterprises by serving dispersedlocal markets. They also providedifferentiated products with low-

scale economies for niche markets

and often specialise in br-rb-con-

tracting for large firms. SMEs are

known to respond flexibly underdifficult'and changing conditionsbecause of their typically Iow capi-tal intensity which allow productsIines and inputs to be changed atrelatively low cost"

The SMEs provide an effective

means of stimulating indigenousentrepreneurship. They facilitategreater employment creation per

unit of capital employed, and aid

the development of local technol-ogy. The SMEs serve as veritablemeans of increasing efficiencythrough cost reduction and !m-proved flexibility. Through theirwide dispersal, the SMEs providean effective means of mitigatingrural-urban migration and prornot-ing the use of local resources.

The labour intensiveness of theSMEs makes the sub-sector con-sistent with Government's" goaland objective of employment andincome distribution while allowingfor sustained productivity increases

through improvements in technol-ogy

SECTION IIA REVIEW OF SPECIAL

SUPFORT PROGRAMMESFOR SMEs DEVELOPMENT

IN NIGERIA

In view of the recognised roleof SMEs, governments concernfor the development of the sub-

sector have been manifestedthrough the establishment and in-stitution of various special supportprogrammes designed to encour-

47

October,/December, 1997

age SMEs. These could be con-

veniently classified into three,namely, Incentlves (fiscal andexport) and tariff regime, Finan-cial support and TechnicalAssistance Programmes.

1. Incentives (Fiscal andExport) and Tariff Regimes

(a) Fiscal incentivesAn array of fiscal incentiveshave been put in place for

_ SME promotion, this include:

Tax relief for small-scale enter.prises during the first six years

of operation as embedded inthe Companies Income TaxAct of 1990 and the IndustrialDevelopment (lncome TaxRelief) Act 179 of 1990amended as Decree 3 of1993;

Pioneer Status which is a taxrelief for non-renewable pe-

riod of five years except a twoyears extension for enterpriseslocated in economically disad-vantaged areas;

In plant training incentive of 2per cent income tax conces-sion for five years;

Investment in infrastructure re-Iief ;

Labour intensive mode of pro-. duction income tax credit of

15 per cent for enterpriseswith high labour to capitalrqtio; and

Minimal local raw materialutilization income tax credit of20 per cent and capitalallowances.

(b) Export IncentivesThe Government has contin-ued to encourage exports byfirms (including SMEs) throughthe provision of a package of

export incentives. The irrcen-

tive measures include

Manufacture in-bond: theimportation of duty free rawmaterials for production of ex-portablg goods on the basis ofa bond issued by a first class

bank which guarantees that all

the end products will be ex-ported;

Import Duty Drawback:Refund of import duty paid forimported raw materials used inmanufacturing export goods;

'Export credit Guaranteeand Insurance Scheme: ih-surance of genuine exportersagainst economic risks, espe-

cially possible default in pay-

ments by overseas buyers;

Export Development Fund:Provision of cash inducementf or exporters who haveexported a minimum ofN50,000.00 worth of semi-manufactured or manufac-tured products;

Fxport Adjushnent SchemeFund: Compensation toexporters for high cost ofproduction arising from infra-structure deficiencies, andpurchase of commodities atgovernment f ixed priceshigher than prevailing worldmarl<ct price;

Additional Capital Allow-ance: An additional annualallowance of 50 per cent of an-

nual turnover by exportingcompanies;

Tax Relief on InterestIncome: Granted to expoytoriented industries on interest

' occtirring on any loanobtained to aid investmentin export activities.

Vol 21 No. 4 Octolter,/Decer rrl-rcl I 997

The government had alsoadopted the use of higher tariffrates to favour this sector whlchhad often been complementedwith even complete import ban onvariety of agricultural products,textile fabrics, plastic products and

other productq. In 1995, for in-stance, unprocessed rubber andnrbber lumps were prohibited frombeing exported while processed

food and vegetable oil were al-lowed to be exported. All thesewere meant to help the localmanufacturers (especially theSMEs). The ban on the €xport ofitems like leather and unprocessedrubber was imposed to encouragetheir domestic processing espe-

cially by the SMEs.

II. Financial SupportProgrammesThis consisted of the establish-

ment of Development Finance In-

stitutions (DFIs) and the use ofcredit guidelines to channel funds

to the SMEs. others are the estab-lishment of National Directorateof Employment (NDE), NationalEconomic Reconstruction Fund(NERFUND), the SME Il LoanScheme, the Fund for Small Scale

Indushies (FUSSI) and the SmallScale Industries Credit Scheme(ssrcs).

(t) Establishment of Develop'ment Institutions And Use ofCredit Guidelines

In recognition of the crucialimportance of credit in SMEpromotion and. cognizant of thereluctance of the traditional finan-cial sector (commercial and mer-chant banks) to extend credit tothis sector, the government estab'lished a number of specialisedcredit financial institutions whilethe Central Bank of Nigeria (CBN)

employed the use of credit guide-

@) Banks' Equlty Holdlng lnCompanies

In its 1988 Budget. Govern-ment Iifted the ban on banks' eq-uity participation in industries inresponse to the clamour by banksto diversify their business bases.

Hitherto, the Banking Act Section73(0 of f969. restricted the banksfrom holding equity shares in non-banking related enterprises. Thepolicy objectives are to stimulateincreased availability of equity capi-tal to SMEs, generate new SMEsand help other SMEs to restruc-ture their capital bases ior sulivaland growth.

(c) Development Flnance In.stftutions (DFIs)

The DFIs were established toserve as conduits for channellingfunds to specific sectors. The Ni-gerian lndustrial DevelopmentBank (NIDB) was set up in 1964to provide soft loans through eq-

uity participation to medium, largeand some small scale units,

The Nigerian Bank for Com-merce and Industry (NBCI) was set

up by the Federal Government ln1973 to cater primarily for credltsupply to the SME sub-sector. TheNBCI also administered the SMEI World Bank Loan Scheme ofUS$41 million secured in 1984.Special feature of the SME 1

scheme included sub-loanmaturities period ranging from 4to 10 years, including a morato-rium of 2 to 4 years. A total of126 SMEs benefitted from thescheme. Also, the various State

Governments established invest-ment development corporationswhich were meant to galvanise thepromotion of SMEs through eq-

uity participation and provision ofterm credit facilities.

rl8

lines.

(a) The CBN Credlt Gulde-llneo

Thls required the commercialand merchant banks to allocate astipulated mlnlmum credit to pre-

ferred sectors (including theSMF-s). Under this approach, dif-ferentlal lnterest rates for sectorcredlt allocations wlth varyingmoratorium on the repayment ofprinclpal loan and advances werestipulated by the CBN. Specifically,in flscal year 1979/80, the CBNdlrected that at least 10 per centof the loans advanced to indig-enous borrowers should be allo-cated to small and medium enter-prises. This was subsequendy in-creased to 16 per cent wtth effectfrom Aprtl 1980 to end-1989. ltwas lurther lncreased to a mini-mum of 20 per cent of total loansand advances from January,1990. Unfortunately, this policydid not prow effectlve as expectedin channelllng credlt to the SMEs

as banks prefer to pay prescribed

penalties glven the uneconomicnature of such small loans and itsadminlstratlon. This fallure of thebanks to meet the prescribd creditallocation to the sectors andsubsectors prompted the CBN tomake it mandatory in 1987 forsuch banks to make the lendingshortfa.lls available to it for onwardtransfer to the sectors and sub-sec-

tors concerned. Thts brought re-

markable result as most bankscomplied whlle some exceeded theminimum requlrement. For exam-ple in 1988, the amourrt grantedto SMEs lncreased by 41.9 percent to N5,090.6 mllllon repre-senting 20.69 per cent of totalbanks loans and advances. Thebanks have slnce continued tocomply (Table l).

Vr.:|. 2l No.4 Oclob€r.,'December. 1 997

(d) National Directorate ofEmployment (NDE)

The NDE, was established inNovember 1986 to prornote andsupport self-employnient. Theprogramme operates tw,o creditguarantee schemes which provideassistance to SMEs and it is com-plemented by an entrepreneur de-velopment programme. The twocredit schemes are the GraduateJob Creation Loan Scheme(GJLS) and the Matured People'sScheme (MPS). Facilities under thetwo schemes is repayable over afive year period at a concession-ary interest rate with varying peri-ods of moratorium. Over 2.300SME projects engaged in soapmaking. food processing, flourmilling, etc. have been supportedby the NDE since its inception.

(e) The National EconomicReconstruction Fund(NERFUND)

NERFUND was set up by theFederal Government in 1989 as

a funding mechanism aimed atcorrecting observed inadequaciesin the provision of medium to longterm financing to SMEs. It wasestablished to facilitate the provi-sion of loans at lower interestcharges than prevailing rates with5-10 years maturity period includ-ing a grace period of 1-3 years. Itwas. therefore. established to mo-bilise financial resources that wouldenable SMEs to have better access

to medium to long term loan fa-cilities, and to help them acquirefixed assets. Beneficiaries of thescheme should be wholly-ownedNigerian SMEs and in case ofmanufacfuring enterprise, at least60 per cent of its raw materialsand other production inputs locallyderived. Prospective beneficiariesare to access NERFUND facilitiesthrough their banks. Since incep-

tion and up to end 1994.NERFUND has' approved 373projects, with clisbursements initi-ated on 200 and commitment ofUS$80.9 million and N333 mil-lion. About 70 of the sub-projectshave been fully disbursed while 21of them have furlly amofiized thetotal loan value-

(f) The SME II SchemeThe SME II loan scheme is a

successor programme to the SMEI which was administered by theNBCI. The US$142 million WorldBanh loan package is administeredby the SME Apex Office of theCBN through participating com-mercialand merchant banks (pbs).

The term loan provided a mafu-rity periocl of 12years including agrace period of 3 years. It alsoprovides working capitalto its ben-eficiaries with maturity period of3 years including 1 year grace pe-riod. A total of 271, projects forUS$132.8 million were approvedfrom the inception of the schemein 1990 to end March 1994 whenprojects approval closed. Totalprojects disbursements amountedto $107.1 million as at June 1996and resulted in the establishmentof 85 new enterprises, and theexpansion, diversification andmodernisation of 102 existingenterprises.

(g) The Fund for Small ScaleIndustries (FUSSI)

The Small Scale IndustriesCredit Scheme (SSICS) are bothFederal Government and StateGovernment supported pro-grarrunes for SMEs. They are ad-ministered by the Ministry of In-dustry. FUSSI is meant to be aninstrument for channelling Gov-ernment assistance to small scaleenterprises in the States. SSICSis meant to assisl in the improve-

ment and expansion of existingsmall scale industries. as well as

financing new manllfacturing in-dustries that produce accessoriesand components for other indus-tries. Loans by SSICS are subjectto a moratorium period of about2 years at concessionary interestrate.

(h) International Financial As-sistance

In addition to accessing creditfacilities from the World Bank andits affiliates such as the Interna-tional Finance Corporation, theGovernment have continued toapproach other international or-ganisations for the provision ofneeded foreign capital for somemedium scale enterprises. TheFederal Government invariablyguarantee and sometimes agreesto monitor or co-finance the SMEsreceiving such external financialsupport. An example was theUS$252 million export stimula-tion loan granted by the AfricanDevelopment Bank in 1988 to fi-nance SMEs in Nigeria.

III. Technical AssistanceProgrammeVarious technical assistance

programmes had been put in placeby the Government. This is to en-sure healthy entrepreneurial development in such areas as properevaluation of viable opportunities,mobilisation of necessary re-sources and eventual fruitful pro-gramme implementation. Some ofthe Government agencies assignedto implement these prograrrrmesinclude the Industrial DevelopmentCentres (lDCs). Centre for Indus-trial Research and Development(CIRD), Centre for ManagementDevelopment (CMD), ProjectDevelopment Agency (PRODA),Federal Institute of Industrial

49

October,/December, 7997Vol. 21 No.4

are abundant evidence

the years, the number of SMEs

established to utilize localraw ma-

terials have increased. Irrdeed,

both NERFUND and SME IIscheme were aimed at catalysing

this development. Most SMEs are

engaged in the processing of Pri-mary local materials either to in-termediate stages or finalconsum-ers. They, therefore, aid the trans-

formation of local raw materials

into useable forms and thus in-crease value added. The SMEs are

known to be very active in supply

of locally processed inputs into rawmaterials such as starch, aicohol,and chemicals for use by largefirms in the pharmaceutical, food

and textile industries.

(iii)Increased ManufacturedExports

The SMEs have also been very

active in the non oil export sector.

Availabie data show that the value

of agro-allied and manufacturedexports, which was about N54.3million in 1986 rose progressiveiy

to N140.3 million in 1989 and toNi007.8 and N6067.1 million in1992 and 1995, respectivelY.Among the processed agro-alliedproducts exported were cocoabutter, cocoa powder. cocoa cake,

textiles and garments and woodproducts including furniture. It issignificant to note that these are

the areas in which the SMEs are

actively involved. Furthermore.SMES role in the export of scraPs

and solid minerals such as precious

stones is enormous although much

of the transactions in these areas

are not officially recorded.

(ivllmprovement in Techno-logical Skill and Capability

The SMEs have positionedthemselves as viable tools for the

transfer and acquisition of techni-

over{iii) increased production of manu-

factured exports;

(M the development of indigenous

technology; and

(v) increasing localcontent of in-dustrial output.However, in this section, the

areas of evaluation would befocussed on employment genera-

tion, increased use of local raw

materials, increased manufactured

exports, dispersal of industries,SMEs contribution to the Gross

Domestic Product (GDP) and im-proving the technological skill and

capability available in the country.

(l) Employment GenerationThe SMEs continue to be

steady avenue for employmentgeneration . There are indicationsthat the SMEs account for about70 per cent of industrialemploY-ment in Nigeria. For instance,projects approved under theNERFUND scheme between1989 and 1993 were estimated

to have direct employment gen-

eration capacity ol 73,227 iobs.Similarly, about 40,000 jobs have

been created by the beneficiaries

of the SME II Loan Scheme. Thetotal employment generation ca-

pacity of the SMEs can only be

appreciated in terms of its multi-plicative effects on other sectors

of the economy.

(ii) Increased Use of LocalRaw Materials

The SMEs have been very ac-

tive in the promotion of increased

use of local raw materials. TheY

have responded very positivelY touillizing identified local raw mate-rials. and have often pioneered theprocessing of such raw materials,

this is because most SMEs are lo-cal-resource basei. Although there

is no complete information, there

Research, Oshodi (FIIRO). Raw

Materials Research and DeveloP-

ment Courncil. The IDCs are es-

tablished to render free techno-managerial assistance to SMEs

towards the establishment of new

enterprises, development mod-emization, promotion and growthof existing SMEs. They are to pro-vide practical assistance in man-

agement are technical services in

selecting appropriate machinery,assist in equipment installation,undertake machine repairs and

maintenance as well as provide on-the jobs training facilities to SMEs

in the handling of machines. Thereare currenfu 21 IDCsgrouped intofour zones. Similarly, the CIRD,CMD, PRODA. FIIRO as well as

RMRDC provide various technical,

extension as well as training serv-

ices to SMEs.

SECTION IIIEVALUAilON OF Slu1g"

PEBFORMANCE

The evaluation of the perform-

ance of the SME sector would be

undertaken principally from thestand point of public policy goals

as enunciated in the industrialpolicy of 1988.

This is because the usual Per-formance criteria like capacity uti-

lization rates, turnover and profitwhich are of interest to owner-manag€rs of enterprises maY notbe of much relevance if they do

not contribute towards the reali-

sation of public policy goals and

objectives. Government PolicYobjectives in this context could be

summarised as:

(il Industrial development andnational integration throughindustrial dispersal;

(ii) provision of greater emPloY-

ment oppoftunities;

50

Vol. 21 No. 4 October/December, 1997

cal know how as they have suc-cessfully adapted imported ma-chinery for local usage. Throughtheir multiplication and resilience,the SMEs have also aided thegrowth and development of indig-enous entrepreneurs.

(v) Industrial Dispersal andNational Integration

Since most SMEs are localre-source based, their wide geo-graphical dispersal have openedup the rural areas and helped inarresting the problem of rural ur-ban drift. They have often alsoserved as a means of linklng hith-erto remote areas to other partsof the country thus contributing tonational integration.

(vi)Contribution to the GrossDomestic Product (GDP)

Although adequate data notavailable, there are indications thatSMEs account for about 70 percent of industrialemployment and10-15 per cent of manufacturingoutput. Generally, the SMEs ap-pearedto have performed reason-ably well on the standard of efficiency as they tend to minimisewastage and idleness. They havealso provided consumers with anexpanding variety and steadysource of goods many of which areproduced as efficiently as possible.

(vii) Capacity UtilizationRate, Sales and Profit

Although no comprehensivenationwide survey on SMEs per-formance has been undertaken,available data from a recent studycovering about 75 SMEs showedthat most SMEs operated between30-35 per cent of their installedcapacities in 1995 and 1996.Both sales and profit have shownno remarkable improvement. Thiscould be adduced to factors such

as reduced consumer demand,weak infrastructural facilities andother bottlenecks or problems as

treated in Section Four.

SECTION IVOUTSTANDING PROBLEMS

AND PROSPECTS

A. ProblemsThe SME sub-sector continued

to be plagued by many problemswhich inhibit its optimalperform-ance. These include:

(i) L^ack of InfrastructuralBaseLack of adequate infrastructure

constifutes one of the greatest con-straints to SME development.Most SMEs have to resort to theprivate provisioning of water, elec-tricity, etc. at great expense. In aWorld Bank study (1989), it wasestimated that the cost of infra-structure such as roads, water,electricity communication and se-

curity accounted for 15 - 20 percent of the cost of establishing amanufacturing enterprise in Ni-geria. The impact of publicinfrastructural inadequacies conse-quently fallmost heavily on small-scale enterprises that cannot affordto provide their own services.

(ii) Constrained Access tocredit

The banking sector is usuallyunwilling to extend credit to theSMEs because of inadequately pre-pared project proposals, incom-plete financial documentation,inadequate collateral including theinability to raise the requiredequity contribution and theabsence of succession plan in theevent of the death of the proprie-tor. As a result, working capital is

stilla major constraint on produc-tion. This is particularly so due the

long lead times in opening lettersof credit, the consequentiai needto hold three months or more ofstocks of imported inputs, theneed to make interest free depos-its at the banks to support appli-cations for foreign exchange andthe long cheque-clearing processin the local banks. Collateral re-mained a major obstacle in work-ing with banks as land is usuallyviewed as inadequate for that pur-pose.

(iii)Poor implementation ofPolicies

The poor implementation ofotherwise sensible regulations andincentives which remain bureau-cratic, inefficient and often dis-criminatory. The resultant confu-sion and uncertainty in businessdecisions and planning have ad-versely affected the SMEs.

(iv) Procurement ProblemsThese problems pose one of

the greatest constraints to improvecapacity utilization rate among theSMEs. This problem is traceableto the unstable macroeconomicpolicy environment in the past fewyears which led to the increase incustom duties and port charges,high cost of foreign exchange andconsequent cutback on importedraw materials in the face of sub-optimal local raw material sup-plies. Related to this is the inac-cessibility to and the high cost ofequipment.

(v) Insufficient flemand forProducts

Insufficient demand for theproducts of the SMEs is also animportant constraint. This can beattributed to the generally low pur-chasing power arising from con-sumers dwindling realincomes. Tocircumvent this, many SMEs have

51

I

O ctober.tD e cember, 19 97Vol 21 No 4

been adopting a credit sales policywhereby a reasonable proportionof their output is sold on credit fora limited period at interest freerate. Of recent however, industrysources revealed that some of thefirms are facing extreme dlfficultyin recovering such credit sales. Theproblem of low demand can also

be as a result of inadequate knowl-edge by SMEs about fringe mar-kets.

(vi)Inability To Adjust PricesInability of SMEs to reasonably

adjust their prices to reflect addi-

tional costs following the substan-tial depreciation of the naira ex-

change rate. This is largely because

doing so makes thern uncompeti-tive with the large firms, whilethose who produce for specificindustrial consumers face theadded difficulty associated withbeing price-takers.

(vii) Poor Educational Back'ground

Lack of reievant educationalbackground and thorough manu-facturing exposure by many SMEproprietors: This is required inorder for them to undertake com-plex expansion of their projects

where such opportunity exists.

Consequently, many of them are

not sufficiently innovative and dy-

namic to meet growing and ex-panding business challenges.

(viii) Non-conduciveRegula-tory and Operational Environ-ment

Multiplication of regulatoryframework. taxes and controlhaveremained burdensome on the op-eration of the SMEs. Many SMEs

have to dealwith various agencies

at great cost.

B" ProspectsThe SMEs offer enormous

prospects in Nigeria's .march to-wards sustained economic devel-

opment if the various problemsoutlined above are addressed.Such would include:

(i) resolving the collateralissue so

as to enhance the prospects

of the SMEs for improved ac-

cess to formal financial sectorresources:

(ii) further streamiining of theregulatory procedures andstrengthening the capacity ofthe relevant institutions so as

to effectively implement andadminister programmes andincentives for the SMEs;

(iii) provision and maintenance ofinfrastructures such as roads,

telecommunication, electricityand security.Thereis need toinvolve the private sector inthese areas for greater effi-ciency;

(iv) the promotion of industry -specific export expansion pro-grammes among the SMEs. Inthis regard, the extractive and

agro-processing industriessuch as textile and garment,leather, chemical and oil prod-

ucts present the greatest pros-

pects. Others are engineeringgoods and other light indus-

tries;

(v) further simplications of tariffaccompanied by a substantialreduction in average tarifflevels;

(vi) the need for assistance de-

signed to improve productionprocesses to meet exportsstandards, improve marketingskills and information aboutmarkets, promote availabilityof services in support of trade

and improve export infrastruc-

SECTION VSI.JMMARY ANDCONCLUSION

The performance of the SMEs

have been mixed. Generally. thesub-sector have to a large extentfilled the gap in the production ofgoods and services. They have

been particularly active in the agro-

food processing business as well

as in the fabrication of spares for

tures;

(vii)need to multiply the linkagesbetween smalland large scaleindustries, specially with re-spect to sub contracting. To-wards this end, there is needto create a system for exchang-ing information on supply anddemand as well as'tech.nologymatters among the relevantorganised private sector;

(viii) need for a p€riodic compre-hensive survey of the SME sec-

tor in the context of opportu-nities for export promotion.

SMEs can be instruments for(a) achieving the poverty allevia-tion objectives of the Governmentbecause they are largely labourintensive, they can therefore be

used to create safety net in tar-geted poverty-programmes and (b)

initiating growth in employmentthrough the development of mod-dr n ellicient enterprises.

SMEs have a potential role toplay to support the export drive,

especially in the area oI sub con-

tracting and in meeting the exportdemand of the diversified but small

market riches in the sub-region. Itwould be cost effective for such

markets to be served by SMEs thatcould bulk-break the products oflarger firms for export. Such ac-

tivities are already taking place

through unofficial exports.

Vbl 2i No 4 O ctober /D e cember, | 9 9 7

the effective running of the indus-tries. They have also contributedto employment generation, in-creased use of local resources, in-creased manufactured and non-oilexports and development of local

technological and entrepreneurialcapability. Although substantialpromotronal programmes havebeen channelled to the sub-sector,

their implementation have fallenfar short of the expectation. As aresult, the SMEs continue to grap-ple with some problems which isamplified by the hitherto unstableeconomic and political environ-ment. Properly fashioned, TheSMEs hold out abrighter futurefor the overalleconomic develop-ment of the country. In this regard,the need to address theinfrastructural deficiencies afflict-ing the sub-sector need not beoveremphasized. Closely related tothis is the need to have adequateinformation on the sub-sector toenhance planning, policy design

and evaluation.

REFERENCES

1. Anderson, Dennis (1982) - "Small Industry in Developing Coun-tries: Some Issues", Staff Working Papers No. 518, The WorldBank, Washington D.C., USA.

2. Diener, Royce - "How To Finance A Growing Business", FredrickFell Publishers Inc, New York.

3. Federal Ministry of Finance and Economic Development (1989).

The National Economic Reconstruction Fund. Information Bulle-tin and Operational Guidelines, January 12.

4. Obitayo, K. M. - "A Review of the New Industrial Policy for Ni-geria, 1988." CBN Economic and Financial Review Vol. 27, No.1, Page 59 - 61, March.

5. Phillips, T. and Adebusuyi, B.S. (1990) "The Effects of Govern-ment Policies on Small and Medium Enterprises', presented at theSeminar on Export Development and Promotion through Smalland Medium Scale Enterprises, March.

6. Sule, E.l.K" (1986) - "SmallScale Industries in Nigeria: Concepts.Appraisalof Government Policies and Suggested Solutions to Iden-tified Problems". Economic and Financial Review,Vol.24, No. 4,Central Bank of Nigeria, Lagos, December.

7. Theodore Cohn and Ray, A. Undberg - Survivaland Growth: Man-aqement Strateqies for the Small Firm. A Division of AmericanManagement Associations (AMACOM) New York, p. 1-4.

8. Uduebo, M. A. (1985)- "The Role of Monetary and FiscalPoliciesin Industrial and Agricultural Development in Nigeria", CBNEconomic and Financial Review. volume 23. No" 1, March.

9. World Bank (1995): "Private Sector Development in Low IncomeCountries, Washington D.C.

October,/Decembet 7997Vol. 21 No. 4

TABLE 1

LOANS AND ADVANCES TO SMALL SCAI.E INDUSTRIES BY

THE BAITKING SECTOR ri)to - 1926

(N',MILLION)

Source Central Bank of Nigeria

Figures are for Commerciai Banks only

AGGREGATE.LOANS ANDADVANCES

AGGREGATE LOANSAND ADVANCES TOSMALL.SCALEENTERBRISES

1.8

2.1

2.0

3.2

6.t8.0

9.3

2A.46

20.59

20.60

22.9

23.8

40.0

34.8

23.6

22.4

26.8

PERCENTAGEALLOCATIONo/o

6,379.2

8,604.8

70,277.0

11,100.0

L 1.550.6

12,170.3

15,701.6

17,53t.9

24,602.3

28,708.8

28,640.8

32,912.4

40,731.6

58,158.9

89,756.0

74A,225.4

157,568.8

1980

1981

1982

1983

'1984

1985

1986

1987

1988

1989.1990

.1991

.1992

.1993

.1994

.1995

.1996

113.4

185.0

2A6.7

^r l oJ3 l.i

705.7

972.2

7,454.3

3,587.3

5,090.6

5,789.5

5,900.0

7,572.3

20,400.0

15,462.9

29,552.5

32,374.5

423A2.7

54

Dr. Poul A Ogwumo, oFR - Governor (choirmon)

Alhoii A. S. tt oiyaki - DeputY Governor,(Generot Administrofion)

Mt.V.A.Odozi - DePufY Governor,(Domestic MonetorY ond

, Bonking PolicY)

Mollom lsmoilo Usmon - DeputY Governor,(lnternofionol OPerotions )

Mr. O. S. OduYemi - Deputy Governor,(Domestic OPerotions)

*t

CENTRAL BANX,OTNIGEBIA

t

,a'-

Printed by:Ar-pne BusrNess Lrurro

Plot 26, Babs Animashaun Sveet,Opp. Census,_Surulere, Lagos.

Iet: 837392

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