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SDG 8 and Nigeria’s economic development 21 Oct 2022

The goal number eight of the United Nations Sustainable Development Goals (SDG 8) is “Harnessing SME Growth for Economic Development.” Maintaining sustainable economic growth and development in most developing countries has continued to prove herculean. With some considering the SDGs as “idealistic”, the general lack of understanding of the goals, and the gaps in financing them, there are many factors standing in the way of the realisation of the SDGs and their set targets.

In the past, SMEs were not well regarded despite their contributions to economic growth. However, this has been changing. The sector is increasingly being recognised to be crucial to the national economic development of all nations across the globe. Governments have also been providing institutional and policy support for the sector. The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is mandated by the federal government to facilitate the development and modernisation of SMEs in Nigeria.

In SDG 8, the UN outlined the need to "promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation, and encourage the formalisation and growth of micro-, small- and medium-sized enterprises, including through access to financial services." The goal, tagged “Decent Work and Economic Growth”, makes it necessary to consider the need to support the development of the SME sector.

SMEs deliver a range of goods and services, generate employment opportunities, contribute to the growth of local economies and communities, foster market competition, and deliver on innovation. Their primary industries of presence include manufacturing, distribution, and services.

According to the World Bank, "SMEs represent about 90% of businesses and more than 50% of employment worldwide. Formal SMEs contribute up to 40% of national income (GDP) in emerging economies. These numbers are significantly higher when informal SMEs are included." In Nigeria, SMEs contribute over 45% of the national GDP and account for about 96% of businesses and 84% of the total employment.

However, even though they are crucial to socio-economic development, most SMEs fail within the first five years due to many factors. The second most frequently stated barrier to SMEs' survival and expansion in emerging markets and developing nations is access to finance. In Nigeria, for instance, accessibility to funding, rather than the absence of financial institutions, is the issue. Most of the businesses cannot obtain either short- or long-term loans due to a lack of sufficient collateral and credit information, strict requirements set by financial institutions, and the high cost of lending.

New enterprises suffer from a lack of financial support from banks in Nigeria, and even those that are already operating lack the necessary collateral. On the other hand, SMEs that acquire funding from non-conventional banks are often choked out by high interest rates. Due to this, most SMEs in the country cannot compete with goods or services from other countries, particularly from China and other large Asian economies.

But there is good news. To fulfil the UN's set goal of financing SMEs, many financial institutions are changing the narrative for SME funding in Nigeria. Access Bank PLC, for instance, has committed to support entrepreneurs and open up markets for small firms by linking them to appropriate networks. As one of the many manifestations of its commitment, Access Bank secured a loan support facility worth up to $50 million from the International Finance Corporation (IFC) to finance SMEs. The facility was aimed at helping Nigerian businesses weather the Covid-19 pandemic and support post-pandemic economic recovery in Nigeria.

Also significant is the All4One Recovery Program of the bank, targeted at providing access to interest-free loans and grants to communities, businesses, and youth interested in SME creation. The program incorporates Access Bank's partnership with organisations that promote vocational training and skills development. This partnership will enable about 15,000 young people to master skills like plumbing, carpentry, welding, etc., at select training facilities for durations ranging between three and six months. Successful trainees will then receive up to N500,000 in funding for their proposed enterprise.

Additionally, Access Bank donated over N2.5 million to aspiring entrepreneurs and company owners during the NYSC/Access Bank Accesspreneur Competition in Abuja last year to help them realise their entrepreneurial goals.

Also central to Access Bank's mission to boost SME creation and funding is its pioneering effort in women banking in Nigeria through its establishment of the well-regarded Gender Empowerment Movement (GEM) in 2006. The program has evolved, and it is now known as the 'W' initiative, since 2014. Since the inception of the initiative, over 75,000 businesswomen from all of the country's geopolitical regions have benefited from the workshops it has organised, helping to grow the women’s business networks, and developing their business ideas despite widespread financial limitations. In collaboration with other initiatives such as the Lagos State Employment Trust Fund, the ‘W’ initiative has provided up to N2 billion in funding for female-owned enterprises.

These efforts indicate Access Bank as a brand that is adept at fostering inclusive economic growth. However, to see a much bigger impact in delivering sustainable economic growth and the targets of SDG 8 in the country, there must be several efforts and partnerships like those being championed by the bank. One institution's efforts, however substantial, requires the contributions of other institutions and individuals for the required level of success. This is why Access Bank combines advocacy with practice in sustainability.

Omobolanle Victor-Laniyan is Head of Sustainability at Access Bank.