Small and Medium-sized Enterprises (SMEs) are a foundational part of Nigeria’s economy, especially in bustling commercial centres like Lagos. These enterprises not only drive job creation and innovation but have the potential to position Nigeria as a significant player in the global marketplace. However, the path to realizing this potential is riddled with systemic challenges. Based on my study on strategic importance of the Nigerian small and medium enterprises (SMES): Myth or reality, which explored the strategic importance of Nigerian SMEs, it’s clear that these businesses are indispensable to Nigeria’s economic trajectory. Yet, to fully harness their capabilities, a multifaceted approach involving infrastructure improvements, targeted policies, and capacity-building initiatives is essential.

On challenges to competitiveness: Infrastructure and policy barriers, for many Nigerian SMEs, the most pressing obstacles are the lack of reliable infrastructure and an underdeveloped policy framework. The country’s power and water systems are particularly inadequate, creating daily operational challenges that stymie growth. In Lagos, for instance, many businesses face frequent power outages, forcing them to rely on expensive, petrol/diesel-powered generators to maintain production. This is not only costly but also unsustainable in the long term.

The government plays a critical role in addressing these infrastructure issues. By prioritizing investments in stable power and water systems, alongside improved transportation networks, policymakers can create an environment where SMEs have the resources they need to thrive. Additionally, a well-articulated policy framework is essential for recognizing and leveraging the wealth-creation potential of SMEs in Nigeria.

In building synergies through cluster formation and networking, SMEs in Nigeria often operate in isolation, which limits their capacity to compete on a larger scale. A promising solution to this issue is the formation of clusters—geographic or sector-based networks of similar businesses. Clusters allow SMEs to share resources, such as equipment and facilities, and to leverage collective expertise. This collaboration not only reduces operational costs but also fosters innovation and facilitates faster response times to market changes, both of which are essential for success in today’s competitive business landscape.

On networking and collaboration among SMEs also enhance their ability to compete internationally, by pooling resources and developing shared strategies, SMEs can produce higher-quality products, improve efficiency, and create a synergistic advantage that individual firms would struggle to achieve on their own.

On capacity building: The role of education and training, to strengthen the competitive positioning of Nigerian SMEs, it’s crucial to invest in capacity building through targeted entrepreneurship development programs. Such programs, focused on the technical and managerial aspects of running a business, can be implemented at multiple levels, including universities and government institutions. By offering comprehensive training in areas like financial management, operations, and customer relations, these programs prepare entrepreneurs to lead their businesses more effectively.

Furthermore, technical skill development is essential for SMEs to meet the quality standards required for international markets. By enhancing technical and management capacities, SMEs can raise their quality of service and product output, thereby increasing their attractiveness to global buyers and investors.

In encouraging internationalization from the outset, one of the most significant insights from my study is the untapped potential of Nigerian SMEs to generate earnings in international markets. Currently, many SMEs are restricted to local and national markets, where they face stiff competition and limited growth opportunities. Encouraging these enterprises to internationalize from the onset, however, could have substantial economic benefits.

Policy initiatives should focus on helping SMEs overcome technological and financial barriers to internationalization. These measures might include grants, training in export processes, and partnerships with international organizations. By fostering an export-oriented mindset early, Nigerian SMEs can expand their customer base, generate foreign exchange, and contribute to national economic stability.

In harmonizing government support programs for greater impact, Nigeria’s government has implemented various programs to support SMEs, but these efforts often lack coordination and are hampered by bureaucratic inefficiencies. For SMEs to fully benefit from government support, it is vital to harmonize these initiatives across the three tiers of government—federal, state, and local. Creating regional offices staffed with personnel familiar with the unique challenges of local business environments can further enhance the relevance and accessibility of these programs.

Simplifying operating rules and regulations is another important step. Complex regulations often prevent SMEs from accessing essential support services, reducing their competitiveness in both domestic and international markets. A streamlined regulatory environment would not only lower entry barriers but also foster a more business-friendly climate where SMEs can flourish.

On financial incentives and infrastructure investment, finally, the provision of financial incentives, such as tax rebates and concessions, would offer Nigerian SMEs much-needed relief. Incentives should be strategically aimed at enterprises that promote the use of local resources and contribute to the broader economic development of Nigeria. Moreover, improving critical infrastructure particularly power, water, and road networks is a prerequisite for long-term growth. Without these basics, SMEs will continue to face operational disruptions that hinder their ability to grow, compete, and create jobs.

In conclusion the journey toward a more prosperous Nigeria relies heavily on the success of its SMEs. By addressing structural barriers, fostering synergies, and investing in the capacity building of entrepreneurs, Nigeria can unlock the full potential of these enterprises. A robust and diversified SME sector will not only reduce unemployment and stimulate innovation but also position Nigeria as a leader in the African economy and beyond.

Policymakers, educational institutions, and business leaders must collaborate to establish a comprehensive support system for SMEs, one that prioritizes infrastructure, policy harmonization, and internationalization. Through strategic reforms and dedicated support, Nigeria’s SMEs can become engines of economic growth, driving sustainable development, and contributing to a resilient national economy.

By Dr. Bisayo Otokiti