Monday, November 2, 2015

Ahmed Williams — The Travails of Small and Medium Enterprise Ownership in Nigeria

Photo: Olaoluwa Rasheed is the CEO of Nigeria’s Bank of Industry, supporting SMEs with loans
A recent World Bank Ease of Doing Business Index showcased how frustrating it is to own and operate a small and medium enterprise business in Nigeria in the 2015 Doing Business Index. The relative link between SME’s, economic growth and poverty alleviation cannot be overstated with regards to enhancing a robust economy.
Thus, one important policy review for the new political administration in Nigeria might lie in the role of government effort to help improve the state of free enterprise in the economy towards enhancing a sustained growth of the national economy. This might be considered a priority endeavor in light of recent ministerial appointments in which the current administration is currently deliberating upon.
In a working paper titled SME’s, Growth and Poverty (Beck, Demirgüç-Kunt and Levine, 2005) published by the National Bureau of Economic Research it is shown that SME’s exert a relative impact on economic growth and which inevitably according to the author of this article contributes to sustained and an enhanced middle class in the Nigerian economy.
However, reflecting on the World Bank Ease of Doing Business Index, there arises the need to itemize the current difficulty encountered by SME operators in the smooth running of their businesses in Nigeria.
Registering a business in Nigeria with Lagos as a case study takes an estimated NGN15,000 plus a 0.75% stamp duty according to the WB report. Yet, another NGN 454,475 plus a development permit from the Lagos State Physical Planning Permit Authority (LASPPPA) in the value of NGN 7,100,616 is needed to obtain construction permits.
Nonetheless, an aspiring SME’s owner still has to go through the hurdle of obtaining state-provided power supply totaling millions of Naira inclusive of a purchase and external equipment connection and installation totaling about NGN 1,559,250 plus an inspection certificate to Eko Electricity Distribution Company totaling about NGN 575,000.
Yet, it doesn’t end there. There still exists the bureaucratic gridlock of registering the company which takes a few months with its associated costs. Then there is the cost of tax obligations and the difficulty of cross-border trading.
Question is why do we make it so incredibly hard for those involved in contributing to the economic growth and development of our economy through all these costs and lengthy state enforcement procedural delays?
Read the full article HERE.