#1Small & Medium Enterprises Development Agency Of Nigeria nbs NATIONAL BUREAU OF STATISTICS MICRO, SMALL AND MEDIUM ENTERPRISES (MSME) NATIONAL SURVEY 2017 REPORT Dr. Yemi Kale Statistician-General of the Federation/CEO National Bureau of Statistics LAGOS | JULY 11, 2019#2Stabilize the macroeconomic environment Align monetary, trade and fiscal policies Accelerate non-oil revenue generation Drastically cut costs Privatize selected public enterprises Achieve agriculture and food security Deliver on agricultural transformation Improve transportation infrastructure Deliver targeted high priority Transportation projects Enable private sector financing of infrastructure Ensure energy sufficiency in power & petroleum products Expand power sector Infrastructure Urgently increase oil production Boost local refining for sell- sufficiency Drive industrialization focusing on SMEs Improve Ease of Doing Business Accelerate National Industrial Revolution Plan implementation "MSMEs are the bedrock of Nigeria's industrialization and inclusive economic development; and the most important component of industrialization as set out in the Economic Recovery and Growth Plan" -H.E. Prof. Yemi Osinbajo /assets nbs NATIONAL BUREAU OF STATISTICS#3OUTLINE 7 1 MSMEs and Economic Growth 2 Survey Background and Methodology 3 Key Findings - Overview 4 Labour Market 5 Finances 6 Challenges Policy Recommendations nbs NATIONAL BUREAU OF STATISTICS#4MSMES-CRITICAL FOR ECONOMIC GROWTH Micro, Small, and Medium Enterprises (MSMEs) play a significant role as the engine for economic transformation and industrialization for both developed and developing countries. • • Key benefits include: Improved income re-distribution (low level capital required) Increased job creation & skills development (particularly for youth, women, elderly) Increased adoption of technology & innovation (competitiveness) Industrial diversification Stimulates local economy (demand down the value chain) Challenges: Vulnerable to economic shocks • Stable and supportive policy environment • Excessive regulation, complex & cumbersome tax process, Skills acquisition for youth population nbs NATIONAL BUREAU OF STATISTICS#5BACKGROUND OF SURVEY 2003 Small & Medium Enterprises Development Agency Of Nigeria Established in 2003 to facilitate promotion & development of MSMEs Highlighted need for accurate and reliable data Small & Medium Enterprises Development Agency Of Nigeria 2010 nbs Strategic partnership with NBS-apex agency for socio-economic statistics 2010-First Edition 2013 2nd Edition - 2017 Third Edition • Main Objectives of the Survey To establish a credible and reliable database for the MSMEs sub-sector in Nigeria and their contribution to jobs and wealth creation. Memorandum of Understanding mandates review every three years, ensuring continuity & trackability nbs NATIONAL BUREAU OF STATISTICS#6DEANNG MSMEs S/N Size Category Employment 1 Micro enterprises Less than 10 2 Small enterprises 10 to 49 Assets (=N= Million) (excl. land and buildings) Less than 5 5 to less than 50 3 Medium enterprises 50 to 199 50 to less than 500 Source of Definitions: • Based on the SMEDAN National Policy on MSMEs definitions • • Adopts dual-criteria class limits: employment and assets (excl. land and buildings) It is possible under this criteria that a conflict of classification might arise. In such cases, the employment based classifications takes precedence. e.g. if an enterprise has assets worth seven million naira (N7 million) but only employs 6 persons, that enterprise shall be classified as micro. nbs NATIONAL BUREAU OF STATISTICS#7SAMPLING METHODOLOGY • The survey was conducted in all 36 states of the federation, including the Federal Capital Territory (FCT), Abuja. Both urban and rural enumeration areas (EAS) were covered. Micro Enterprises Canvassed through the National Integrated Survey of Households (NISH) module Frame of EAs determined by National Population Commission. Housing & Population Census used for household component Household Listing Exercise used to update frame & determine households for survey. Sample: 22,200 households 600 households with enterprises interviewed per state 15 households selected per EA • . . Small & Medium Enterprises Canvassed through the National Integrated Survey of Establishment (NISE) module Frame for Small & Medium Enterprises used for establishment component. Probability Proportional to Size (PPS) used to allocate number of establishments to be covered in state, and within each sub- sector (within state) 4,000 SMEs visited across all states, including FCT. Subject Areas Ownership Status Employment Information Educational Qualification Operating Cost Capacity Utilization Market Channel & Export Revenue Establishment Growth Technical Support Services nbs NATIONAL BUREAU OF STATISTICS#8OUTLINE 1 MSMEs and Economic Growth 2 Survey Background and Methodology 3 Key Findings - Overview 4 Labour Market 5 Finances 6 Challenges 7 Policy Recommendations nbs NATIONAL BUREAU OF STATISTICS#910000 5000 0 OVERVEWOFANDINGS Sokoto Gusau Katsina Gwarzo Kano Potiskum Maidugur Kaoje Yelwa Darazo Zaria Nigeria Mubi Kaduna Babana Bauchi Gombe Jos Minna Kaiama Kafanchan Abuja Shendam Bida Kwali Ogbom Oyo 99 rin Isanlu shogbo Wukari Makurdi Ado Ekiti Owo Akure Lagos Ogoja Benin City Iko Onitsha Okigwi Warri Owerri Calabar Aba egema ort Harcourt EDO EKITI ENUGU GOMBE IMO JIGAWA KADUNA KANO KATSINA STATE Total Number of Enterprises: 41, 543, 028 • Micro: 41,469,947 (99.8%) Small: 71,288 (0.17%) Medium: 1,793 (0.004%) Top SME States: Lagos: 8,395 (11.5%) Yola • • • Oyo: 6,131 (8.4%) • Osun: 3,007 (4.1%) Fewest SME States: • Yobe: 102 (0.1%) Bayelsa: 300 (0.4%) Borno: 538 (0.7%) ............. KEBBI KOGI KWARA LAGOS NASARAWA NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE ZAMFARA FCT nbs NATIONAL BUREAU OF STATISTICS#10OVERVEWOFFINDINGS-TRENDS 20.0% 10.0% Growth: 2013 to 2017 0.0% -10.0% -20.0% -30.0% -40.0% -50.0% -60.0% -70.0% Total MSMEs Micro Small Medium Highest Gaining - States (SMEs): • Kwara (526.5%) . Nasarawa (132.5%) Jigawa (116%) Key growth trends: • . • Micro enterprises, being 99% of MSMEs drives the trend for the entire category Compared with 2013, both Total MSMEs and Micro enterprises grew by 12.1% Small enterprises, grew 4.6% from 2013 The number of medium-sized enterprises decreased significantly from 4,670 in 2013 to 1,793 in 2017 (61% drop) Biggest Decline- States (SMEs): Kano (-70.5%) · Rivers (-45.1%) . Plateau (-27.8%) nbs NATIONAL BUREAU OF STATISTICS#11COMPOSITION OF MSMES - BY BUSINESS TYPE Small Enterprises Medium Enterprises EDUCATION MANUFACTURING WHOLESALE/RETAIL TRADE HUMAN HEALTH & SOCIAL WORKS 27% 23% 18% 10% ACCOMODATION & FOOD SERVICES 8% PROFESSIONAL, SCIENTIFIC AND... 4% OTHERS SERVICES ACTIVITIES 3% REAL ESTATE ACTIVITIES ADMINISTRATIVE AND SUPPORT... 2% 1% TRANSPORT & STORAGE 1% INFORMATION AND COMMUNICATION 1% CONSTRUCTION 1% MINING & QUARRYING ADMINISTRATIVE AND SUPPORT SERVICE... 1% PROFESSIONAL, SCIENTIFIC AND... 0% MANUFACTURING WHOLESALE/RETAIL TRADE HUMAN HEALTH & SOCIAL WORKS 43% 13% 12% ACCOMODATION & FOOD SERVICES 9% EDUCATION 7% CONSTRUCTION 5% TRANSPORT & STORAGE 3% INFORMATION AND COMMUNICATION 3% OTHERS SERVICES ACTIVITIES 2% 2% AGRICULTURE 1% ARTS, ENTERTAINMENT AND RECREATION REAL ESTATE ACTIVITIES 0% 0% ARTS, ENTERTAINMENT AND... 0% MINING & QUARRYING 0% WATER SUPPLY, SEWERAGE, WASTE... 0% Key Observations: • . WATER SUPPLY, SEWERAGE, WASTE... 0% 0% AGRICULTURE Composition of sectors is different for each business type classification, primarily due to staff requirements of more formal establishments. Eg. Education & Construction are low for small business but top 5 for medium-scale enterprises. Education, Manufacturing, and Wholesale/Retail Trade make up 68% of small enterprises. Manufacturing, Wholesale/Retail Trade, and Human Health & Social Works make up 68% of medium enterprises. nbs NATIONAL BUREAU OF STATISTICS#12COMPOSITION OF MSMES - BY BUSINESS TYPE Micro Enterprises Wholesale/retail trade Agriculture Others services activities 42.3% 20.9% 13.1% Manufacturing 9.0% Accommodation & food services 5.7% Transport & storage 3.1% Construction 2.2% Professional, scientific and technical... 1.8% Human health & social works | 0.6% Key Observations: • • Wholesale/Retail Trade, Agriculture, and other services activities make up 76.3% of Micro enterprises. Sectors requiring high numbers of employers or skilled labour – education, human health & social works, info. & communications have very low numbers of micro enterprises Accommodation & Food services is a preferred sector (top 5) across all business classification types. • Arts, entertainment and recreation 0.5% Information and communication 0.3% Water supply, sewerage, waste... 0.2% Mining & quarrying 0.2% Education 0.1% Administrative and support service... 0.1% Real estate activities 0.1% nbs NATIONAL BUREAU OF STATISTICS#13OWNERSHIP STRUCTURE Small & Medium Enterprises FAITH BASED OTHERS ORGANISATION 2% COOPERATIVE 1% PRIVATE LIMITED LIABILITY COMPANY 21% PARTNERSHIP 5% 6% SOLE PROPRIETORSHIP 65% 48.1% 40.1% 10.9% 0.3% 0.6% BELOW 20 20-25 26-35 36-50 51 ABOVE Mcro Enterprises Partnership 2% Faith Based Organization 0% Others 1% Sole Proprietorship 97% 40% 30% 13% 10% 7% Below 20 20-25 26-35 36-50 51-60 Unsurprisingly, a large majority of micro businesses are sole proprietorships, SMEs however are more distributed with 65% sole proprietorship, 21% private limited liability, 6% faith based, and 5% partnerships. Micro businesses are mostly younger people 26-50y.o., while SMEs skew older - 88% are over 36 y.o. nbs NATIONAL BUREAU OF STATISTICS#14OUTLINE 1 MSMEs and Economic Growth 2 Survey Background and Methodology 3 Key Findings - Overview 4 Labour Market 5 Finances 6 Challenges 7 Policy Recommendations nbs NATIONAL BUREAU OF STATISTICS#15EMPLOYMENT - BY GENDER/STATE/SECTOR 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 Employment by Gender - Micro Enterprises • 0 Male Female Male Female Employees Owners Sectors with highest number of employment: • Education (1,065,755) Human Health & Social Works (612,622) • Manufacturing (607,498) Key gender trends: • • • MSMEs generated 59,647,954 jobs as of December 2017, 5% or 2,889,715 of those jobs were created by SMEs. Males accounted for 57% of jobs created by SMEs, compared to 43% for women More males are employed in total in both Micro and Small/Medium enterprises. There is greater disparity amongst employees, and within SMEs. Notably, Education sector is the only sector with gender parity in jobs (53% women). Manufacturing employs 3 times more males than females. States with highest number of jobs created: Lagos (11.5%) Oyo (8.4%) Kano (5.2%) nbs NATIONAL BUREAU OF STATISTICS#16EDUCATION OF OWNERS 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% SMEs ■NO EDUCATION PRIMARY MES BELOW PRIMARY JSS HIGHEST EDUCATIONAL LEVEL SMES MES NO EDUCATION 2.5% 23.8% BELOW PRIMARY 0.6% 3.7% PRIMARY 4.0% 21.7% JSS SSS NCE/ND/NURSING 2.4% 7.5% VOCATIONAL/COMMERCIAL 2.2% 0.9% 15.8% 30.9% 12.8% 5.5% B.SC/B.A/HND 37.0% 3.8% M.SC/M.A/M.ADMIN 14.3% 0.2% DOCTORATE 5.1% 0.0% OTHERS (SPECIFY) 3.4% 2.1% TOTAL 100% 100% Key Observations: • • Owners of Micro enterprises are less educated - 76.4% have SSS certification or less. By contrast, 51% of SME owners have attained either a Bachelors or Masters degree. Similarly, 78.2% of employees of Micro enterprises have SSS certification or less. ■NCE/ND/NURSING ■VOCATIONAL/COMMERCIAL SSS ■B.SC/B.A/HND ■M.SC/M.A/M.ADMIN DOCTORATE • ■OTHERS (SPECIFY) nbs NATIONAL BUREAU OF STATISTICS#17EMPLOYMENT SKILLS GAP Only 34% of Micro enterprises said they could find ready availability of qualified personnel. In comparison 77.1% of Small and Medium enterprises say there is a ready availability of qualified personnel Micro Enterprises - Highest Skills Shortage Information & communication: 72.8% Accommodation & Food Services: 71.1% Wholesale/Retail Trade: 67.8% Other Services Activities: 67.3% Manufacturing: 66.9% Key Observations: SMES-Highest Skills Shortage Other Services Activities: 36.2% Agriculture: 35% Arts, Entertainment & Recreation: 33.3% Water Supply, Sewerage, Waste Management: 33% Accommodation & Food Services: 32.6% For small and medium enterprises, sectors that require specialized skills and technical know-how suffer from high skills shortage Micro enterprises find the highest skills shortage in sectors that are consumer facing, with the exception of Manufacturing which also requires specialized skills. Accommodation & Food Services are both severely short skilled for both business classifications.. nbs NATIONAL BUREAU OF STATISTICS#18OUTLINE 1 MSMEs and Economic Growth 2 Survey Background and Methodology 3 Key Findings - Overview 4 Labour Market 5 Finances 6 Challenges 7 Policy Recommendations nbs NATIONAL BUREAU OF STATISTICS#19STARTUP CAPITAL Mcro Enterprises 20.6% 3.1% 7.9% 4.7% 63.8% ■ Below 50k ■ 50-100k ■ 101-200k ■ 201-300k Over 300k ■ Below 10 • Majority of Micro businesses started with less than N50,000 in initial startup costs. Only 4.7% start with more than N300,000. Wholesale/Retail Trade, Transport & Storage, and Agriculture are the most capital intensive for micro enterprises • Small & Medium Enterprises 1.1% 7.9% 0.9% 5.2% 2.0% 8.0% 74.9% ■10 to 20 ■ 21-30 ■ 31-40 ■41-50 ■ Above 50 ■ Not Stated Similarly, 75% of SMEs start up with less than N10 million in capital. 6% of MSMEs however start with over N40m in capital. nbs NATIONAL BUREAU OF STATISTICS#20SOURCE OF CAPITAL For the majority of enterprises - both Micro and SMEs - personal savings was the most common source of capital. Nationally, only 49.5% of SMEs (that are sole proprietorships) reported having access to bank credit, 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 PERSONAL SAVINGS 55.6 61.2 17.5 LOAN 5.3 23.6 11.7 8.3 5.4 2.7 0.7 FAMILY SOURCE COOPERATIVE/ESUSU ■Small and Medium ■Micro GRANTS • • Key Observations: Personal Savings is most common source of capital - 61.2% of MEs and 55.6% of SMEs Loans (17.5%) and Family (11.7%) round out sources of capital for SMEs Family (23.6%) and Cooperative/Esusu 7.0 0.9 OTHERS • round out sources of capital for Micro Enterprises. For SMEs who had access to bank credit, commercial banks were the main source of these funds (91.9%), while 4.7% accessed credit from Micro-Finance Institutions, and 1% from Development Institutions. SMEs in Oyo, Jigawa, Lagos, Kano, and FCT reported having the most access to bank credit. nbs NATIONAL BUREAU OF STATISTICS#21FINANCIAL & SUPPORT SERVICES There's a widespread lack of capital and poor integration into the financial markets, which may be due to low business planning incidence and low formalization. Most enterprises are operating without legal & financial protection. • Business Plan: Micro: 75.6% have no business plan SME: 65% have no business plan. Lack of planning in MSME contribute to high rate of failure as well as a reluctance from investors in providing capital. Business Registration: • Micro: 97.8% not registered Unregistered businesses are hard to track for development and policy planning, regulation, and revenue generation purposes. Business Registration: • Micro: 96.61% uninsured • SMES: 63.9% uninsured MSMEs are particularly vulnerable to business shocks, lack of integration into financial markets increase risks. nbs NATIONAL BUREAU OF STATISTICS#22OUTLINE 1 MSMEs and Economic Growth 2 Survey Background and Methodology 3 Key Findings - Overview 4 Labour Market 5 Finances 6 Challenges 7 Policy Recommendations nbs NATIONAL BUREAU OF STATISTICS#23PRIORITY AREAS FOR ASSISTANCE Access to Finance is are top priority area for assistance for both SMEs (67.9%%) and MEs (90.5%) alike. For SMEs, the priority the most pressing area for assistance is in power & water supply (83.5%), as well as tax rate Small & Medium Enterprises reduction (73.1%). Micro Enterprises GOOD TRANSPORT FACILITIES 90 80 OTHERS SPECIFY 70 60 50 40 PROVIDE SECURITY 30 20 10 0 PROVISION OF INFRASTRUCTURE (ACCESS ROAD, MARKET ETC) PROVIDE FARM INPUTS(SPEED, SEEDLING, EQUIPMENT, FERTILIZER ETC) FINANCING/FINANCIAL ASSISTANCE Lack of access to finance 100 ADEQUATE AND REGULAR POWER AND 80 Others Lack of work space WATER SUPPLY 60 40 REDUCES TAX RATE 20 Inconsistent policies 0 Weak infrastructure REDUCE INTEREST RATE Lack of access to REGULAR FUEL SUPPLY AT APPROVED RATE research & development Obsolete equipment Lack of entrepreneurship/vo cational training nbs NATIONAL BUREAU OF STATISTICS#24UNFAVOURABLE GOVERNMENT POLICIES-IMPACT Micro Enterprises Small and Medium Enterprises Others Embargo on loan facilities Interest rate Banning of important of goods Custom duties Withdrawal of subsidies Trade permit High fuel price Banning of importation of goods Prohibition of sales of certain... Traffic control OTHERS SPECIFY EMBARGO ON LOAN FACILITIES HIGH INTEREST RATE BANNING OF IMPORTATION OF GOODS CUSTOM DUTIES PROHIBITION OF SALES OF CERTAIN GOODS WITHDRAWAL OF SUBSIDIES TRADE PERMIT Taxes Demolition Power supply 0 10,000,000 20,000,000 Key Observations: TRAFFIC LAWS HIGH TAXES DEMOLITION HIGH ELECTRICITY TARIFF 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 • • High fuel price, taxes, and power supply are the top unfavourable policies for Micro enterprises. These reflect challenging operating environment for MEs and importance of policies that mitigate these challenges. High electricity tariff, high taxes, and high interest rate are top unfavourable policies for SMEs. These reflect the challenges of formalization, including access to the financial markets, and the importance of financial market initiatives in mitigating these challenges for SMEs. nbs NATIONAL BUREAU OF STATISTICS#25OUTLINE 7 1 MSMEs and Economic Growth 2 Survey Background and Methodology 3 Key Findings - Overview 4 Labour Market 5 Finances 6 Challenges Policy Recommendations nbs NATIONAL BUREAU OF STATISTICS#26Policy Recommendations Main policy recommendations proposed are a review of the system of classification of business-particularly from the MSME National Policy; and targeted policy implementation for each classification to address strengths and challenges of each business type. Re-classification: Micro enterprises are the majority of businesses in Nigeria, however this large sub-sector can still be further broken down based on pro- establishment behaviour (registration, turnover, etc.) Introduction of "one-man business"/freelancers whose main objective is self-sustenance. Introduction of additional criterion in classification: employment, assets, and formal registration. Targeted policies by business type: • Micro businesses face challenges related to day-to-day running costs - fuel, electricity, working capital SMEs face a more complex set of challenges related to access to capital and industrial utilities. Policies aimed at both business types should not be generic or lumped together. nbs NATIONAL BUREAU OF STATISTICS#27nbs NATIONAL BUREAU OF STATISTICS Plot 762, Independence Avenue, Central Business District, Abuja. Email: [email protected] Web: www.nigerianstat.gov.ng fwww.facebook.com/nigerianstatistics t@nigerianstat THANK YOU FOR YOUR ATTENTION!