[ad_1]
SMALL and Medium-sized Enterprises, SMEs, including micro businesses, are the lifeblood of the Nigerian economy. Combined, these enterprises account for around 46.3 per cent of the domestic GDP, over 96.9 per cent of business enterprises, and 87.9 per cent of employment. Although these ventures play a vital role in supporting the largest economy and population in Africa, Nigerian SMEs fail to make a significant mark globally. Out of 1.2 million Nigerian SMEs operating in 2020, only 95,576 entities exported their products or services – a participation rate of 7.7 per cent – based on the SMEDAN and NBS 2021 MSME Survey report. Additional insight from The Nigerian MSME report 2022 by Kippa suggests that combined with micro businesses, SMEs account for only 6.2 per cent of gross merchandise exports. In contrast, SMEs including micro businesses in India contribute about 40.0 per cent of the overall exports and South African counterparts have historically contributed 35.0 per cent-40.0 per cent.
The low participation of Nigerian SMEs in the export market, despite improvements in globalisation in recent decades, highlights weak international competitiveness. Several factors have been blamed for the inability of Nigerian SMEs to compete internationally including non-compliance to global standards, lack of funding, the inefficiency of the logistics system, poor government support, and so on. While these reasons are true, they only offer a one-dimensional perspective of the critical limiting factor facing Nigerian SMEs internationally. However, assessing the adherence of Nigerian SMEs to sustainable values provides further insight into issues around the lack of global competitiveness. Sustainability, in general, refers to concepts, methods, and actions that ensure production and consumption activities are carried out in a manner that preserves the planet and promotes inclusive gains to all members of society. A relevant definition for SMEs adapted from the Encyclopaedia of Corporate Social Responsibility is “the concept and practice undertaken by small, micro-, or medium-sized businesses with regard to the way they relate to local and global social, environmental, and economic issues.”
Embracing sustainability is essential in a globalised economy where values matter. As the world has evolved to become more inclusive, tackle climate change, reduce various forms of discrimination and promote economic well-being for all, large multinationals and SMEs must consider these standards, especially when interfacing with the global market. The World Economic Forum (WEF) in March 2022 reported that 75% of Generation Z prefer to buy products or services that are made sustainably rather than to go for brand names that do not adhere to these values. The WEF noted that other age groups of consumers have been observed to exhibit similar preferences.
It is also not uncommon to see brands de-marketed because of their use of child labour, economic exploitation, discrimination against groups of people, or the failure to use eco-friendly means of production. Nike, Nestle, and Airbnb are among examples of brands that have taken blows from their consumers over concerns about their adherence to sustainability values. For Nigerian SMEs, competing in the international market not only means meeting international health and hygiene standards but aligning operations to appeal to the core values of international consumers. Another reason sustainability offers a holistic solution to challenges faced by Nigerian SMEs internationally is access to funding. The inability to access funds is a critical challenge for SMEs in Nigeria, which results in the inability to scale activities and reach the global market. The reality, however, is that poor funding access by SMEs is due to the failure of businesses to meet the criteria for capital investment rather than the unavailability of investors and funds.
ALSO READ FROM NIGERIAN TRIBUNE
On the one hand, poor corporate governance, opaque structure, and high informality affect the chances of many SMEs in attracting the needed private equity. Where the structure is right and bookkeeping is accurate; low gender representation and involvement in environmental degradation are setbacks for Nigerian ventures. On top of that, there is discrimination against women-owned businesses across Nigeria and the sub-Saharan Africa (SSA) region. Based on Africa Development Bank (AfDB) data, a funding gap of $42 billion for SSA women exists even though 1-in-4 women is an entrepreneur, and in Nigeria, 48% of MSMEs are women-owned. This distasteful trend reinforces the need for better adoption of sustainable values that promote equity, fairness, and economic growth.
Also, there is the challenge of innovation that Nigerian SMEs face. Most Nigerian exports are dominated by primary commodities with little to no value-add. Consequently, they tend to be cheap in the international market. In contrast, innovating around primary products to extract the most value can improve the economic value and competitiveness of Nigerian exports. Basing exports on simply extracting resources and shipping them off can likely disincentivise care for the environment and sustainable production. On the other hand, a sustainability mindset will spur entrepreneurs to think creatively about new ways to solve problems sustainably and sell innovative products. Encouraging SMEs to rethink how they approach sustainability might be arduous, considering that not many businesses are familiar with the concepts and importance of sustainable practices. To move the needle, stakeholders must create incentives whether in the form of tax breaks or condition-based credit to incentivise sustainable practices among SMEs.
Beyond public awareness campaigns, reorienting the mindset of SME owners and operations can be achieved in conjunction with incubators and accelerators so that beyond learning,business operations can be integrated with the sustainability framework. Lastly, there should be efforts on the part of the government to mandate and enforce minimum Environmental, Social, and Governance (ESG) standards in a manner that is enabling and growth-stimulating. SMEs hold great potential that can elevate Nigeria’s contribution to the global economy. Repositioning Nigerian businesses on the global stage requires a paradigm shift in mindset, ensuring business values and operations are aligned with global practices that promote inclusive and sustainable development.
- Idam tweets at @Mekkhanik
[ad_2]
