The aforementioned reforms and policy interventions provide the needed environment for small businesses in Nigeria and the coming of the AfCFTA could not have been at a better time.
Independent of the AfCFTA, the Federal Government of Nigeria has in recent times embarked on some far-reaching reforms aimed at enhancing ease of doing business both for the Small and Medium-sized Enterprises (“SMEs”) and across other strata of business in Nigeria.
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Some of these reforms can be seen in the areas of policies, laws, business formation and registration, post-incorporation filings and taxation.
Two of the legislative instruments which are critical to these reforms deserve some mention here:
Companies and Allied Matters Act, 2020 (CAMA, 2020)
The signing of CAMA, 2020 into law by President Muhammad Buhari on 7th August 2020 came as a very cheering news to the SMEs community.
Some of the provisions which impact directly on SMEs include but not limited to the following
(i) a single member/shareholder for a private company
(ii) minimum share capital in place of authorized share capital. This allows promoters of business to pay for only shares that are needed at the point of incorporation;
(iii) exemption of SMEs, small companies or companies with single shareholders from the requirement of appointing Auditors to audit their financial records
(iv) filing, share transfer and meetings can be done electronically by private companies
(v) Statement of compliance which was hitherto signed by legal practitioners can now be signed by the business owner or his agent
(vi) introduction of Limited Partnerships and Limited Liability Partnership thereby providing options for promoters who may want to incorporate partnership instead of limited liability companies
(vii) Appointment of company secretary now optional for private companies
(viii) AGMs and other company meetings can now be held virtually, amongst other reforms.
Finance Act, 2020
Complementing the reforms under the CAMA 2020 is the Finance Act.
Enacted first in 2019, the Act was further expanded and re-enacted to among other things address the negative impacts of COVID 19 on small businesses and this led to the new Finance Act, 2020.
The new Finance Act was signed into law on 31 December 2020 and took effect from 1st January 2021.
It introduced over 80 amendments to 14 different laws such as the Personal Income Tax Act, Companies Income Tax Act, Capital Gains Tax Act, Value Added Tax Act, Customs & Excise Tariff Act, Tertiary Education Trust (TET) Fund Act, Fiscal Responsibility Act, Public Procurement Act, CAMA, Nigerian Export Processing Zone Act and Oil and Gas Export Processing Free Zone Act.
SMEs are expected to take advantage of the incentives provided under the new Act.
SMEs with a turnover of less than N25 Million are exempted from Companies Income Tax and TET tax amongst other incentives.
SMEs engaged in primary agricultural production are qualified for pioneer status for an initial period of four years and an additional two years.
MSME Survival Fund
In a bid to ameliorate the impact of COVID-19 on small businesses, the Federal Government of Nigeria launched the N75 Billion Survival Fund for Micro, Small and Medium Enterprises (MSME).
The Fund which was touted as part of the economic sustainability Plan of the Federal government is meant to support small businesses to meet basic operational needs and provide funding in order to boost the production capacity of MSMEs in Nigeria.
The AfCFTA
The aforementioned reforms and policy interventions provide the needed environment for small businesses in Nigeria and the coming of the AfCFTA could not have been at a better time.
The critical question remains, how SMEs can leverage the opportunities provided under the AfCFTA to scale up their operations.
SMEs are often considered the economic backbones particularly in developing countries as they account as major contributors to the GDP and in the area of job creation.
Nigeria has a vibrant SME ecosystem. Out of the 95 Million SMEs in Africa, over 45 Million of them are in Nigeria.
Thus, on the continent Nigeria plays a huge role, accounting for close to 50% of SMEs.
In terms of economic impact, SMEs contribute 48% of national GDP in Nigeria, make up the 96% of businesses and contribute 84% of employment.
Despite the contribution to the economy, SMEs in Nigeria in particular, have continued to grapple with the challenges of high cost of capital and lack of access to funding as well the inability to compete globally.
Due to the largely informal nature of SMEs in Nigeria, obtaining data for the purpose of planning has also been difficult.
On this, the role of Small & Media Enterprises Development Agency of Nigeria (SMEDAN) in amongst other things, formalization of SMEs in Nigeria should be encouraged.
