Nigeria has a blooming community of Small and Medium-Scale Enterprises (SMEs) but the play of these SMEs in the global commerce market remains very marginal or non-existent. Over the past few years, the Nigerian government and policy makers have actively initiated, and supported projects seeking to groom capacity and SMEs scale their operations. According to the Nigerian Bureau of Statistics, the contribution of Nigerian SMEs to the Gross Domestic Product (GDP) index has been up to 48% in recent times, they account for about 50% of the industrial jobs locally and nearly 90% of the manufacturing sector.
The global consumer is increasingly afro-centric; from fashion to music to food, African themed products are bidding global appeal. The demography of the Nigerian market also gives Nigeria a specialised advantage as a conduit for vibrant global trade within the continent. As such, organic transition to a thriving export market can be achieved if these resources are properly harnessed.
The vantage that technology has provided SMEs cannot be quantified. With the synergy of good product and technology, SMEs easily claw in six figure revenue within 1-5 years of operations without much and from a fiscal perspective, exports catalyse development. Given that Nigeria is yet to stake her bet in the global market, SMEs have been bandied as her out.
There is no better time than now for SMEs to position to exploit the global export market!
The question, however, is “Are Nigerian SMEs ready?” Export readiness entails certain critical indices which are a mesh of legal and commercial considerations and they include:
Governance and Compliance: For many SMEs, compliance is minimal. Compliance must be cultural before an SME ventures globally. Where necessary, consultants are to be hired to handhold the SME through the legal and compliance process. Also, if the promoters are not well organised, there is no market strategy or business plan that can cure the local trouble that can ensue. Agreements have to be clear as to the parties, rights, obligations and entitlements and should be in writing.
It is not enough to Scale, Is the business Sustainable? Locally, the focus may be scaling operations and capacity to but, with exports, the playing field changes, for instance, risk is more significant. While scale is necessary, sustainability is mandatory? The business strategy must clearly outline a path for sustenance.
Product standardisation: The product get-up and brand ID must be uniform or at the very least, similar, across the various markets. If due to market compliance requirements there is a need to customise the product, then this must be properly factored into the product concepts and the marketing strategy adopted by the SME.
Understanding of the global competitiveness landscape: Where are the opportunities and the deficiencies applicable to the markets? How significant is the impact of red-tape regulations? How does this impact local capacity? Who are the competitors? What is their market share? All these and more are the questions an SME seeking to export must ask and answer. The success of entry into and penetration of global markets is largely dependent on the application of the data derived from this review.
Book-keeping and Finance: A lot of SMEs manage financials like mom & pop shops. No processes are applied, and where applied, without the requisite sophistication. Optimism does not cure flawed calculations. Projections must be based on properly analysed data which hedge risks sufficiently.
Leverage Technology: SMEs need to increasingly leverage technology including media, tools and infrastructure. This will enable easier expansion and where optimised, the man-power required to monitor the performance of exports will not increase in such a way as to burden the SME with expansion costs. Digital disruption is reducing trade costs, increasing SME involvement in trade and birthing lots of local companies who have a “born-global” status i.e. they launch into the global market from day zero.
Connect with global organisations, clusters and business zones: Business hubs and clusters create capacity buffers. Also, relationships with international organisations boost access. The current legal regime for economic free zones are not suited for SMEs as they are expensive. The Nigerian SME community may consider setting up an economic free zone seeking to harness export capacity for SMEs that has a low entry bar and sufficient infrastructure.
Intellectual Property: the goodwill of the product, trademarks, domain names, copyright, all these are critical intangible assets that must be harnessed by the SME. In most cases, the protection for these assets is territorial (i.e. limited to each country or commercial bloc), as such, the SME must be proactive in registering trademarks in the jurisdictions where it wants to play. A strategy for managing counterfeiting and fraud must be developed.
A quick look at policy
The Nigerian Export Promotion Council (NEPC), the Central Bank of Nigeria (CBN), the Ministry of Finance (MOF) and the Nigerian Customs Service (NCS) are key regulators within the sector. While there is quite a lot of policy engagement which seek to advance development for SMEs, there is a critical need to harmonise policy both locally and across Africa (which is now a commercial bloc given Nigeria’s signing of the African Continental Free Trade Area Agreement (ACFTAA). To encourage increased lending by commercial banks to SMEs, central banks and designated financial service regulators must play a proactive role and set out a policy framework for channelling adequate funds to the SME sector.
Depending on the nature of the products sought to be exported, there are incentives applicable to Nigerian exporters including access to funding via the Export Expansion Grant Fund and the Export Development Fund.
A snapshot of the export process.
Where the export is of commercial scale, the process will entail:
- Settling commercial terms with contacts at the destination and procuring relevant commercial papers;
- Obtaining registration from the NEPC;
- Dispatch using commercial agents;
- Process export proceeds from authorised banks.
Registration with the NEPC can be completed within one week. Some products prohibited from export include maize, timber (rough or sawn), scrap metals, artefacts, unprocessed rubber latex, wildlife and imported goods.
On a final note, switching up from local to global is not rocket science and, where carefully considered, SMEs have an opportunity to bloom.
Oyeyemi Immanuel is an experienced commercial lawyer with leading Nigerian law firm, Templars. She is also a writer and has published scores of articles for young professionals. An advocate for human capital development, she uses different platforms to enhance the skill and capacity of Nigeria's young talents.