The Micro, Small and Medium Enterprise (MSME) sector is a significant source of employment, making a substantial contribution to economies globally. But in Nigeria and elsewhere in Africa, the sector remains a cause of sustained frustration, failing to achieve its much-touted potential.

According to a survey carried out by the National Bureau of Statistics (NBS), in collaboration with the Bill and Melinda Gates Foundation, the Financial Access Initiative of the New York University, Low Income Financial Transformation, and the Lagos Business School, recently, nearly 40 per cent of MSMEs in Nigeria employ between three and 20 employees, making up a significant, though a largely invisible layer of the sector.

The recently-published Nigeria Small Firm Diaries study posits that small firms (defined in the study as enterprises employing between three and 20 employees) should be treated as a unique segment, quite different from micro firms and larger firms with specialised managerial capacities.

The Nigeria Small Firm Diaries study involved collecting weekly cash flow data from 161 businesses in Lagos, Enugu and Kaduna states for a full year, revealing new information on financial flows and financial decisions.

The research was launched in 2021 and lasted until August 2022 to provide insight into small firms and the economic decisions they make. Similar research was carried out in Colombia, Indonesia, Fiji, Ethiopia, Uganda and Kenya.

At the launch, the NBS urged the government at all levels to pay more attention to SMEs as they are the bedrock of the economy. The Guardian gathered that small firms straddle formal and informal sectors, which gives them the agility to negotiate a complex and volatile business environment.

Survival in this environment, The Guardian also gathered, demonstrates a degree of resilience and capability that has led the Small Firm Diaries to term owners of these firms ‘stability entrepreneurs’.

Seeking stability as much as growth, these stability entrepreneurs are the middle that has remained ‘invisible’ whilst creating employment, producing goods and services and capturing value for local economies.

According to the Statistician-General of the Federation, Adeyemi Adeniran, the objective of the study was to identify challenges faced by small businesses and proffer solutions.

He said the total monthly revenues from the sample of small firms interviewed reportedly range between less than N1 million to N54 million, with 75 per cent of the small firms reporting revenues of N440,000 or less monthly.

He said that the results indicated that the volatile nature of the revenues and expenses of these small firms were neither predicted nor desirable. He harped on the relevance of the survey to the nation’s economic growth, especially as it would result in the production of credible data on MSMEs and positive implications for policy formulation and implementation by the government.

Adeniran recalled that the Bureau had, over the years, been collaborating with other key agencies such as the Central Bank of Nigeria (CBN), the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), among others, to support MSMEs’ sustainable growth nationwide.

According to him, the SFD initiative would also provide unprecedented insight into small firms and their economic decision-making as it relates to their markets, productivity constraints, profitability, and growth, the impact of access (or lack of it) to technology and financial services.

He said: “It is also expected that the outcome of the research will inform product design and marketing of digital financial services to better meet the needs of small business owners, employers and their customers.

“It is also worthy of note that the study will further advance understanding of the distinct experiences and challenges of women running small firms and offer new recommendations to policymakers and others on how to eliminate the gender profit gap.

“In essence, the SFD research has direct relevance to economic development and poverty alleviation in Nigeria, and as such NBS is proud to be part of this innovative research. We have come a long way in planning and preparation for the research and at the present data collection is ongoing across various selected sites in Lagos, Enugu and Kaduna states”, the Statistician General added.

He listed the research’s targeted sectors of interest as including Light Manufacturing, Agro-Processing and Selected Services with growth potential and also thanked the partners for supporting the research, promising that the findings will be valuable to current efforts by the NBS to update its MSMEs database.

Commending the research, the Director-General, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Dr. Olawale Fasanya, said with the right data, the growth of SMEs in the country was guaranteed.

Presenting the findings, the Executive Director of the Financial Access Initiative and Professor of Public Policy and Economics at New York University, Jonathan Morduch, said the research revealed that 40 per cent of SMEs were owned by women with many of the businesses relying on family and close allies for finance.

He gave key recommendations to address the issues in the SME sub-sector to include more sustained attention to the growth and development of SMEs in terms of programmes and infrastructures, easy access to working capital and the development of social support programmes targeted at employees of small business to give them a sense of belonging.

The study finds that small firms face challenges that impede their ability to grow and reduce their value in the economy, majorly of which are access to capital and precarious work conditions by employees

At the end of the day, it is the economic and household pressures that small firms absorb that compromise their capacity to achieve stability and growth. The Guardian gathered that small firms continue to support the financial needs of their owners and their employees, including household healthcare needs, trade premises security, and other services that the government should ideally provide.

With the financial health of customers deeply under threat and the cost of supplies rising daily, even access to working capital, stakeholders say will not help.