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Why we are not so feeling the impact of SMEs on the economy



You may simply be among those saying that the investment in the SMEs in Nigeria has not shown any proportional effect and therefore should not be adequately funded. Obewe Nwachinemere has this to say:

A cursory glance at the structure of SMEs in Nigeria reveals that 50% are engaged in distributive trade, 10% in manufacturing, 30% in agriculture and the remaining 10% in services. A special feature of Nigerian SMEs is that distributive trade component is generally considered more commercially viable than the manufacturing component; hence they attract more funding from banks and other financial institutions. Only 10% of our SMEs are engaged in the manufacturing sector! That is not only disheartening; it pinpoints the reason why the Nigerian SME space hasn’t pulled as much weight as it ought in driving economic development. SMEs’ contribution to industrial production and employment was 47% and 49% respectively in Malaysia in 1985, 45% and 64% in South Korea in 1991, and 52% and 64% in Germany in 1994, contributing more than 50% of the GDP of European and American countries, and over 40 per cent in most of the Asian countries. Want to know the reason behind their less dependence on imports? It’s manufacturing!
The implication is that we have continued to spend the nation’s foreign reserves in the importation of finished consumer products that could be sourced locally. The 2011 third quarter report on Nigeria’s trade by the National Bureau of Statistics shows that “refined mineral products, textiles and associated articles and vehicles, aircraft and associated parts, represented the highest growth in imports between the third quarter of 2011 and the same period of 2010 while crude oil exports contributed 95.3 per cent of total exports.” Imports of prepared foodstuff, beverages etc. grew by 36.7 per cent on a year-on-year basis. On a year-to-date basis, America has been Nigeria’s largest import destination at N2.94 trillion (USA-N1.81tn) closely followed by Asia (especially China) at N2.78 trillion and Europe at N2.76 trillion. Total imports year-to-date to African countries stood at N882.8 billion by the end of third quarter of 2011. This has resulted in the continued low capacity utilisation and low production in Nigeria-based companies and industries resulting in high unemployment figures in the country. Imagine the amount of foreign exchange savings that local production could drive and the multiplier effects on the economy!

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