SMALL AND MEDIUM ENTERPRISES IN NIGERIA: AN OVERVIEW

Overview of Small and Medium Enterprises in Nigeria.

This article is an overview of small and medium enterprises (SMEs) in Nigeria.

It provides key insights about SMEs in Nigeria.

SMEs in Nigeria make valuable contributions to the Nigerian economy.

They make about 49.78 percent contribution to the national Gross Domestic Product (GDP).

In addition, SMEs make contributions to the economy in terms of the number of persons they engage in employment and labor.

About 2,889,714 persons (including owners ) are employed by SMEs in Nigeria.

Perceptions about small and medium business start-up difficulties in Nigeria

As entrepreneurship increases worldwide, intent and expectations to start business is highest in developing economies.

Nigeria has the highest proportion of the world’s population who believe they have the skills to run a business.

Nigerians are believed to have positive perceptions about entrepreneurship than people in other parts of the world.

Almost 90% of Nigerian adults think they have the ability to become entrepreneurs.

This belief is not merely an opinion, as research has shown that out of every 100 Nigerian adults, 35 are involved in some sort of entrepreneurial activities.

Despite having positive perceptions about business, many businesses do not last in Nigeria.

Entrepreneurs are believed to be solutions to achieving sustainable economic growth in Africa.

Yet, without enabling environment, small and medium enterprises will continue to face obstacles that limit their potential contributions to their economies.

The breakdown of small and medium enterprises in Nigeria.

According to the latest (2017) enterprise research survey in Nigeria. The total number of enterprises in Nigeria is 41,543,028.

The breakdown of numbers of enterprises in Nigeria are:

  • Micro enterprises – 41, 469,947 (99.8 %), most businesses in Nigeria are in the micro enterprise category.
  • Small and medium enterprises – 73,081 (0.2%).

Classification of Enterprises in Nigeria.

According to the World Bank classification of SMEs and the Nigerian MSME policy classification.

Enterprises in Nigeria are classified as:

classification of enterprises in Nigeria.
Enterprise classification

Key insights about Small and Medium Enterprises in Nigeria.

This section provides key insights about Micro small and medium enterprises in Nigeria based on the MSME survey.

Overview of SMEs in Nigeria major economic sectors.

The major economic sectors with over 80% of SMEs in Nigeria are:

  • Education (27%).
  • Manufacturing (23.4%).
  • Wholesale/Retail Trade (18%).
  • Human Health & Social Works (10.4%).
  • Accommodation & Food Services (8.4%).

States with highest number of SMEs in Nigeria.

  • Lagos (11.5%).
  • Oyo (8.4%).
  • Osun (4.1%).
  • FCT (3.9%).
  • Edo (3.7%).

Ownership structure of SMEs in Nigeria.

A breakdown of SMEs according to ownership status are:

  • Sole Proprietorship (65.7%).
  • Partnership (5%).
  • Limited Liability Company (20.8%).
  • Faith Based Organizations (5.7%).
  • Cooperatives (0.9%).
  • Others (1.9%).

Use of professional services by SMEs in Nigeria

Most SMEs in Nigeria do not make use of professional services.
However, among those that use professional services, the most patronised are:

  • Accountants and Auditors.
  • Lawyers.
  • Business Consultants.

SMEs tend to make use of the services of Business consultants as a one-off activity. For example, for preparing business plans rather than for long term services.

Professional services by SME sectors.

The use of professional services by SMEs in Nigeria according to the major economic sectors:

  • In the Education Sector, out of 19,719 SMEs, the SMEs that use the services of lawyers are (12,610). Those that use the services of accountants and auditors (12,734), business consultants (5,635). While those that use none (2,350).
  • Also, in manufacturing – out of 17,094 SMEs – those that use the services of lawyers (6,386), services of accountants and auditors (6,247), business consultants (4,879), none (4,868).
  • In addition, Wholesale/Retail Trade – out of 13,130 SMEs, those that use the services of lawyers (5,547), services of accountants and auditors (6,174), business consultants (4,190) and none (3,509).
  • In the Human Health & Social Works sector- out of 7,596 SMEs – services of lawyers (4,385), services of accountants and auditors (5,075), business consultants (2,504), none (983).
  • For Accommodation & Food Services – out of 6,108 SMEs – services of lawyers (3,829), services of accountants and auditors (3,956), business consultants (2,364), none (850).

Number of SMEs with business plan.

The use of business plans by SMEs according to the major sectors are:

  • In Education sector – 14,860 out of 19,719 (75%).
  • Manufacturing – 9,755 out of 17,094 (57.1%).
  • For Wholesale/Retail Trade – 8,324 out of 13,130 (63.4%).
  • Human Health & Social Works – 4,530 out of 7,596 (59.6%).
  • Accommodation & Food Services – 3,865 out of 6,108 (63.3%).

Number of SMEs with business insurance.

In addition to business plan, the following are the numbers and percentages of SMEs with business insurance. These are the figures among the top sectors in Nigeria.

  • Education – 6,650 out of 19,719 – (33.7%).
  • Manufacturing – 4,466 out of 17,094 – (26.1%).
  • Wholesale/Retail Trade – 4,959 out of 13,130 – (37.8%).
  • Human Health & Social Works – 3,276 out of 7,596 – (43.1%).
  • Accommodation & Food Services – 2,893 out of 6,108 – (47.4%).

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