Definition: Small and Medium Enterprise in Nigeria

For the purpose of the SMEEI Scheme a small and medium enterprise is defined as any enterprise with a maximum asset base of N500 million (excluding land and working capital), and with no lower or upper limit of staff.

Eligibility for Funding:
To be eligible for equity funding under the Scheme, a prospective beneficiary shall:

1. Register as a limited liability company with the Corporate Affairs Commission and comply with all relevant regulations of the Companies and Allied Matters A ct (1990) such as filing of annual returns, including audited financial statements;
2. Comply with all applicable tax laws and regulations and render regular returns to the appropriate authorities; and
3. Engage or propose to engage in any of the businesses in the CBN’s SMEEIS guideline (i.e. every legal business activity, excluding Trading/Merchandise and Financial Services).

Beneficiary Requirements:
Beneficiaries will be expected to:

1. Ensure prudent utilisation of funds;
2. Keep up-to-date records on the companies’ activities under the Scheme;
3. Make the companies books, records and structures available for inspection by the appropriate authorities (including banks and the CBN) when required;
4. Comply with guidelines of the Scheme; and
5. Provide monthly financial and operational reports to the investing banks before the 15th of the next succeeding month.

The recommendations of industrial associations, particularly Manufacturers Association of Nigeria (MAN); National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA); National Association of Small and Medium Scale Enterprises (NASME); and National Association of Small Scale Industries (NASSI) will be mandatory for members of these associations. Membership of recognised NGOs engaged in entrepreneurial development and promotion of small and medium scale enterprises will also be an advantage.

Challenges for Business:
1. It is not open to all sectors or industry.
2. Although the revised guideline is more flexible than the initial, it still ensures that not every business can aspire to access the facility.
3. It is not open to start-up businesses. This is crucial, as statistically, every 8 of 10 new businesses fold up before 3 years, and nobody will invest in your business, which has no proven track-record of profitability.
4. Recommendations of industrial Associations will not be given to non-members. Spending part of capital on membership of an association may be premature, if one has not engaged profitably in the business for at least one year.
5. Despite revised criteria for eligibility, micro-business funding is still zero.

Alternative Business Route:
1. Go the old-fashioned American way. Use OPM (other people’s money) to start up. It is interest-free, and lack repayment pressure. How do you access this? Draw up your business plan to help you. Do Feasibility Study of an already established business in the sector. Meet and interview people who have succeeded and failed at the business. You will learn more from those who have failed (what not to do; what pit-fall to avoid) than from the success stories (they will not usually share pit-falls as they do not want to look stupid; they will not also willingly share success secrets). The bottom-line, you must be able to convince friends and family that you know what to do profitably with their money.

2. Invest in your brain power, rather than pay people to do things. You can learn a lot about business basics, by browsing through websites dedicated to helping small businesses. Know your limits. If you need a professional website, do not give the assignment to your fledgling brother in school who has been playing with FrontPage. Chances are that you will not get the best output. By all means, cut cost. You can have a good website for as little as N10, 000.00, then pay a software engineer to automate it. Some localised franchises can host a domain for as low as N5, 000.00. The important thing is to have a budget and look for the best offered within the budget.

3. Do not join the band-wagon. Have a clear focus, and pursue it. If you do business because others succeed in it, you will fold up when others do too.

4. Start small. Do not rent a lavish office-space on an annual income that barely pays the rent. Big businesses like Microsoft, Google and Apple started in basements and trailer-caravans. If your business depends on image/appearance, get a modest space, and make the interior presentable.

5. Always make lengthy preparation for every event. Meeting a customer, meeting a supplier, negotiating rent, interviewing prospective staff, brokering deals. The scenario you have often rehearsed will not always play out, but your brain is already primed to navigate possible outcomes.

6. Join business clubs or support groups. You can set up your own support team, based on your business needs. You may even make them into your board of advisors.

7. Be sincere in ALL your business dealings. Integrity makes people trust you for repeat business. Do not over-promise, else you will be called a liar. Always under-promise with a view to over-perform.

8. Pray like you do not know what to do; work like you do not know how to pray.

Article by Emrys Ijaola
Banker/ Economist