COUNTRY REPORT ON “NATIONAL SME DEVELOPMENT

AND BUSINESS CLUSTERS”

PRESENTED BY MR.EZIKPE EGBUTA KALU (NIGERIA)

(A). INTRODUCTION

The overriding objective of Nigeria’s industrial policy is to accelerate the pace of industrial development by radically increasing value added at every stage of the value chain. Under this policy, the most part of Nigeria’s resources will no longer be traded in their primary state. The government has emphasized increases in total factor productivity by pursuing knowledge and skill-intensive production on the basis of best practices. Nigeria’s industrial development strategy will encourage forward and backward linkages in a few niches. The government will continue to provide the enabling environment for private sector leadership, facilitate renewal for sunset industries, and encourage innovators.

2.Specific policy thrusts include the following:

  • Establishment of a structured and efficient micro, small, and medium-size enterprise sector to enhance sustainable economic development, generate employment, and create wealth.
  • Facilitate the development of an industrial sector that is internationally competitive and can take advantage of existing preferential arrangements, as well as give priority to the processing of Nigeria’s abundant resource endowments into intermediate raw materials or finished goods for local consumption and export.
  • Development of science and engineering infrastructure, well trained technical and managerial personnel, physical plants, tools, spare parts, materials, and other inputs needed to operate efficiently and profitably.

(B). GENERAL INFORMATION ON NIGERIA

3.Nigeria has an estimated population of 140 million– nearly one-quarter of Sub-Saharan Africa’s population and still remains the most populous country in Africa. Nigeria is located on the west coast of Africa. It is bordered by the Gulf of Guinea, Benin, Cameroon Niger and Chad. It occupies a total area of 923,770 km2 with a 4,047 km land boundary and 855km stretch of coastline. Nigeria is constitutionally a federation of 36 States, with the city of Abuja as the Federal Capital Territory. Nigeria is richly endowed with natural resources, including petroleum, natural gas, bitumen, tin, columbite, iron ore, coal, limestone, lead, etc. The national currency is the Naira (N).

4.Nigeria has a large domestic market, which could serve as a springboard for entering export markets. These and many other national assets could pave the way, seizing the many development opportunities that come with cross-border cooperation and the globalization of industry, trade and investment. With skillful management, such opportunities could be converted into higher per capita income, job creation and reductions in poverty.

(C). HISTORICAL BACKGROUND OF “NATIONAL SME DEVELOPMENT AND BUSINESS CLUSTERS”

5.Although the manufacturing sector (including micro, small, and medium-size enterprises) has the potential to create wealth and employment, the sector has stagnated in Nigeria, and its contributions to GDP and employment remain small. The activity mix in the sector is also limited, dominated by import-dependent processes and factors. Although reliable data are unavailable, rough indicators show that capacity utilization in the sector has improved perceptibly since 1999 but the sector still faces a number of constraints, including the following:

  • Lack of demand for the products and services of SMEs, and ineffective linkages between industry and research institutes and universities.
  • Lack of political will to implement local content and technical know-how policies.
  • Lack of engineering capacity to translate scientific research results into finished goods and maintain existing machinery, low level of entrepreneurial capacity, complete lack of institutional mentoring and technological support, and paucity of trained artisanal skills.
  • Unfair competition from dumped, secondhand, counterfeit, smuggled, and substandard products.
  • A weak legal framework, weak business, financial, and information management systems and practices, an underdeveloped payment system.
  • Systemic and operational constraints that impede the competitive capacities of large manufacturing companies.

6.The informal economy, which employs the bulk of Nigerians, faces additional constraints such as: low market access, poor access to credit, poor information flow, discriminatory legislation, poor access to land, weak linkage among different segments of operations in the sector, lack of infrastructure for microenterprises, and weak safeguards against occupational and other health hazards.

(D) THE CURRENT ISSUES AND TRENDS

7.The challenges facing the new industrial development strategy in Nigeria includes poor infrastructure, lack of skilled labour, unreliable power supply, multiple taxes, absence of credits, etc. The consequences of these challenges are high unemployment levels, low GDP, low productivity, poor capacity utilization, insecurity, etc. This justifies the need for an Industrial Development Strategy that will enable Nigeria to concentrate efforts and resources in order to create conducive atmosphere for the private sector to thrive. The strategy therefore is the Cluster Concept, which will enable Nigeria to create a community of businesses located together in which members will seek enhanced environmental, economic and social performance through collaboration in managing environmental and resource issues. By working together, these businesses will seek a collective benefit that is greater than the sum of individual benefits. The industrial cluster will work at the following levels: Free Trade Zones; Industrial Parks; Industrial Clusters; Enterprise Zones; Incubators; Export Processing Zones; Free Ports; Border Market Free Zones; and Special Economic Zones.

8.The adoption of the cluster concept as one of the strategies for Nigeria’s industrial development is in line with the seven point agenda and vision 20-20 of the present administration. The cluster concept therefore is a refocusing of the country’s implementation strategy to achieve rapid takeoff and survival of industrial enterprises in Nigeria even as many developed and developing nations have taken similar routes which led to the transformation of their economies. The Industrial Clusters Development Strategy involves creating a community of businesses located together. The advantage is that members can work towards global trade competitiveness while government can concentrate on infrastructure and other amenities closer to the production areas, thereby boosting productivity.

(E). ACHIEVEMENTS

9.Meanwhile government is working on a framework to establish model clusters using the available land and facilities in the four zonal Industrial Development Centers (IDCs) in Bauchi, Oshogbo, Owerri and Zaria. The aim is to enable government concentrate efforts and resources in creating conducive atmosphere for the private sector to thrive. It is envisaged that the proposed model clusters would serve as successful examples for States, Local Government Areas, and Private Sector Organization. The establishment of an Industrial Development Fund (IDF) to stimulate the growth and development of SMEs, support the revival of ailing industries and promote forward linkage in the industry value chain. The encouragement, establishment and upgrade of SMEs to modern and standard enterprises. The promotion of cluster-based industries to facilitate provisions of common facilities, particularly, energy and other infrastructural facilities. The encouragement of the utilization of alternative/renewable energy sources for SMEs. In keeping with the plan for industrial development, government has awarded contracts for national survey to promote industrial clusters and Enterprise Zones. It is expected that the survey and designs when concluded would provide the base line data for the effective implementation of the business cluster programme.

(F). CONCLUSION

10.The development of SMEs in Nigeria is most appropriate at this time when the Government of Nigeria has committed to push for economic empowerment, employment generation, poverty alleviation and food security among others. This is because it is a demonstrated fact that in developing economies in particular, SMEs are engines of economic growth. “Building SMEs private sector and diversifying the economy is crucial for sustainable economic development”. It is worthy to note that “Nigeria has never been found wanting in terms of policies, because it has got so many. The difficult task has always been the inability to implement these policies”.