It is my prayer for this new year to be prosperous, irrespective of the experiences and disruptions we have had in 2020. A different year by any definition, strange and challenging especially for businesses and economies throughout. Consequently, for a hopeful 2021 and to accelerate economic growth in Nigeria the Micro Small Medium Enterprises (MSMEs) which is the lifeblood of most economies in the world needs to be given more attention and further recognition. No doubt, MSMEs support wealth creation, employment creation, standard of living, and in poverty reduction, amongst others. However, with my observation so far in Nigeria, particularly in Lagos State the economic hub of the country, the most significant of all the benefits of MSMEs is that it reduces poverty but this can majorly be said to be from an informal and unrecognized category that I refer to as the Nano businesses within the MSME or small business space.
These Nano businesses are the various “solopreneurs” and home-based businesses such as make-up artists, event planners, battery chargers, independent dispatch riders, vendors, call center agents, fashion designer, vulcanizers, drycleaners, corner shop owners, single retail marketers, repairers, painters, business center operators, market women and men in the various open markets, among others. They play an unrecognized but important role all across the country but by classification, they are not likely to meet the Small and Medium Enterprises Development Agency (SMEDAN) micro-business criteria, which is the least classification. So invariably they appear unaccounted for and in my view, these informal business settings constitute a large portion of our economy according to investigation.
As the economy continues to shrink with less formal employment opportunities and with significant loss of jobs due to the novel coronavirus (COVID19) pandemic and possibly with the economic recession, a big reason to stop waiting around for jobs and simply create own employment is Nano business. Nano-business is usually made up of 1-3 people, with even less than Fifty Thousand (N50,000) Naira initial capital outlay, however with a target of daily income for sustenance of the operator. More importantly, this form of business does not necessarily target long-term capital growth. The most essential benefit is that the Nano business provides employment opportunity that guarantee’s the operator a stable daily income. Even though it supports independence, entrepreneurial skills, self-reliance, and poverty reduction it is largely unrecognized in the country by ruling class. Likewise, amongst the employed class in Nigeria it is now a common phenomenon to hear about running a side hustle. Many are developing Nano businesses as side hustles to support monthly salary income. This is an indication of how the business population is growing and the formal working environment changing to make Nano businesses viable as an economic driver in Nigeria. Therefore, it is crucial for government to pay attention to this identified business class.
Even though the Small and Medium Enterprises Development Agency (SMEDAN) the organ of the government responsible to promote the development of the MSME sector in Nigeria, their most recent survey report, captured the number of micro-enterprises in the whole country as 41,469,947. This number appears not to have taken into consideration these important informal Nano businesses in the country, which are labour intensive and exist in most homes and neighborhoods. Undoubtedly, the Nano businesses are currently seen as micro-businesses by regulators in the country but by definition and context observation, they are clearly not. They are simply different in all ramifications because the business size and scale are different from micro-businesses. Furthermore, many research outcomes in the country over the years suggest that micro businesses are more in the retail sector with more women and youth participation in the country, this can also be said of Nano businesses but with less assets and capital requirements.
Therefore, due to the importance of this set of businesses a subcategory of small businesses, with sales turnover and assets values that are lesser than that of micro businesses should be classified and recognized as the Nano businesses because they operate with less capital. In addition, they should be accounted for going forward in the country and government should encourage their business registrations with incentives. Since they enjoy a closer relationship with customers than other forms of businesses and some are even generational. In fact, this form of business is the lifeblood of most homes in Nigeria currently according to survey, because its a breeding ground for entrepreneurial development.
For the sake of clarity, the use of the term-Nano has nothing to do with nanotechnology. It is only to adjudge that nano is smaller than micro and such level exist within the small business ecosystem. If put into the right context, Nano businesses should exist as the largest segment within SMEs in Nigeria because of their economic relevance, coverage, and spread. Simply, it is a form of business without a fancy business plan or a five-year projection to expand and all. Most times Nano businesses are with no employees, lack structure, or even the least a business registration and frequently they lack bank accounts. Therefore, a national survey is suggested to capture those that have been existing and stable for a certain number of years. So that a data base can be created for analysis, support, policy formulations and necessary interventions by government.
What must be observed in the country with key interest is that the Nano-business ecosystem continues to grow without adequate recognition and attention from the government. Some even run business associations willingly due to the important role they play politically and economically but without Corporate Affairs Commission (CAC) registration. If Federal and States governments including other policy makers recognize their significance and offer interventions and business support services such as capacity building, networking, technology usage, access to resources, funding, and counseling to these Nano businesses, they will become more structured and the rate of failure of such businesses will decline and they will further impact the economy positively. Besides, a national business database is vital, it would provide insights into the business population, demographics, age distributions, mortality, and help with infrastructure gaps. It can also help in developing the right targeted policies to fix or alleviate, social issues and it can also be used for so many verifiable and evidence-based statistics, evaluations, and a lot of inferences can be derived from it.
On a positive note, a small business can be a great tool to reduce the increasing unemployment rate in the country and bridge the financial gap for citizens trying to be independent and be self-employed. In the end, it will contribute to the total Gross Domestic Product (GDP) generated in the nation, and will be captured in real terms. It can expand the tax-base and also tax revenue from business income taxes, sales taxes, and other required State and Federal taxes and levies.
It is significant to mention that Nano businesses are just as viable as micro, small, or midsize businesses but largely with informal orientation. Consequently, the government needs to recognize the Nano business and the important role they play in the economy. More attention is therefore required on small businesses and policy interventions to tackle the obstacles to ease of setting up and doing business in the country are suggested. Once a business-friendly environment that makes business excel easily, is provided by the government – infrastructure, regulatory, national policy interventions in particular, a business can strive and scale up quickly to deliver and create jobs to support economic growth.
In conclusion, to have a better result going forward, government, policymakers, banks, and SMEDAN need to intensify their efforts to disseminate information on financing, capacity development, technology, and other needs. SMEDAN can launch a mass registration program for Nano businesses nationwide for a data base setup. More importantly, uncertainties and multiple taxation in the system, regulatory reforms, and macroeconomic environment needs more government attention. Good luck!
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Dr. Timi Olubiyi, an Entrepreneurship & Business Management expert with a Ph.D. in Business Administration from Babcock University Nigeria. A prolific investment coach, seasoned scholar, Chartered Member of the Chartered Institute for Securities & Investment (CISI), and Securities & Exchange Commission (SEC) registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: [email protected], for any questions, reactions, and comments.