SMEs (A Catalyst for Economic Growth and Development in Nigeria): Conceptual Clarification

Our SMEs journey started with the INTRODUCTION on SMEs as A CAtalyst for Economic Growth and Development in Nigeria. Today we will talk about the CONCEPTUAL CLARIFICATION of SMEs.

There is no generally accepted definition of a “small” business because the classification of firms as large or small is a subjective and qualitative judgement.

SMEs are defined differently in the legislation across countries, in particular because the dimension “small” and “medium” of a firm are relative to the size of The domestic economy.

However, SMEs can be defined by the volume of sales and turn-over, by the type of industry, paid up capital, and number employees, or by the degree of development and economic structure present.

The OECD refers to SMEs as the firm employing up to 249 persons, with The following breakdown; Micro (1 to 9), Small (10 to 49) and medium (50 to 249).

In 1998, the central bank of Nigeria defined small enterprises as those with an annual turn-over not exceeding  NGN 500, 000.  In the 1990 budget, the federal government defined small enterprises for the purpose of commercial bank loans to firms with annual turnover not exceeding NGN 500, 000.

The national economic reconstruction fund has put the ceiling for small firms at  NGN 10 million.

In July 2001, the National council of industries(at its 13th meeting in Makurdi, Benue),categorized small business as those employing  (i) total capital of over NGN 50 million but not more than NGN 200million( including  working capital but excluding the cost of land), and/or (ii) 101 to 300  workers.

Generally speaking, economic development refers to the problem of underdeveloped countries and economic growth to the developed countries.

According to Kindleberger, ” economic growth means more output, while economic development implies both more output and changes in the technical and institutional arrangement by which it is produced and distributed. 

Growth may well involve not only more output derived from greater amount  of inputs but also greater efficiency, i.e,  an increase in output per unit of input.. Development  goes beyond this to imply changes in the composition of output and in the allocation of inputs by sectors “.

In the next episode, we will look into THE NEXUS BETWEEN SMEs AND ECONOMIC GROWTH…

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