SMEs, National Economy And The Digital Age

In my remarks titled “National Development and Knowledge Economy in the Digital Age: Leapfrogging SMEs into the 21st Century”, I intend to highlight measures that can enable greater growth of SMEs in Nigeria using conventional and digital channels. I also intend not only to provoke the hearts and minds of our graduating students, but also challenge them into becoming part of the solution to a greater Nigeria, because despite the hues, cries, and complaints about this country, this remains the land of indescribable opportunities, the land where finding a simple solution to a common problem can lead to unimaginable financial prosperity. You just must be focussed on the right things!

As you may be aware, many of us in leadership positions today, including the eminent personalities seated here today, were from humble beginnings.  Most of us probably had uneducated parents. But through a dint of hard work, focus, and a little bit of good fortune, we have all come this far.

In fact, the effect of SMEs on a nation’s growth and prosperity is tightly interwoven with my own personal story. Growing up, my parents, recognized that the only way to brighten my chances for a better future was to provide me with a good education. I witnessed their toils as they struggled to pay my school fees, sometimes using proceeds from a small palm-oil plantation we cultivated in our hometown. I sympathised with their inability to sufficiently support me through those periods, despite all the luxuries that some of my peers had.

With their relentless reminders, I remained diligent and determined to accomplish my dream of becoming a leader in my chosen field of finance. With these same virtues, I joined the Nigerian-American Merchant Bank, an affiliate of First Bank of Boston, in 1987, and in 1990, joined Zenith Bank as a pioneer staff. It is these same virtues that propelled me to become the Bank’s Group Managing Director 20 years later, and then to be appointed the Governor of the Central Bank, by the special grace of God, in June 2014, and reappointed by President Muhammadu Buhari for a second 5-year term in June 2019. If anyone had told my parents that the small palm-oil business they were running at our hometown would produce a Central Bank Governor, I am sure they w0uld have laughed the person off!

When I look back at some of my peers in school who focused on other things besides hard work and dedication to excellence, I see a different turn in their journeys through life. For this and many other reasons, I remain eternally grateful to God and to my parents for the principles they imparted in me.

While my intent today is to awaken and instigate the job and wealth creation spirits among today’s graduates, I know that many of you here expect me, as the Governor of the Central Bank of Nigeria, to talk about SMEs, National Development, and the Digital Economy.

As we are all aware, a vibrant and growing SMEs sector is critical for achieving our goals of enabling greater growth of our economy and in creating jobs for our teeming youths.

Today’s lecture comes at a time when the entire globe, including Nigeria, is gradually recovering from the devastating effects of the COVID-19 pandemic. In particular, the economy suffered significantly from the unprecedented shock triggered by the containment measures, which was imposed in many countries in order to contain the spread of the virus. These responses led to an over 60 percent drop in the price of crude oil in the 1st half of 2020, along with a significant disruption in global supply chains.  As a result, the Nigerian economy fell into a recession in the 3rd quarter of 2020. In addition to the drop in crude oil prices, we also had to contend with a reduction in our oil production quota, which resulted in a significant decline in government revenue, and our foreign exchange earnings.

In response to the impact of the virus on our economy, the monetary and fiscal authorities deployed unprecedented counter-cyclical measures aimed at containing the effects of the pandemic and driving the recovery of our economy. These targeted measures were aimed at supporting vulnerable segments of our society, as well as stimulating growth in key sectors of our economy such as Agriculture, and Manufacturing. As a result of these measures, our economy exited the recession in the 4th quarter of 2020 and is currently on a path of gradual but sustained recovery.

Although our economy remains on a growth trajectory, the impact of the pandemic in terms of job losses, low productivity and weak growth has continued to linger. Given the huge potential of SMEs in accelerating economic growth and employment generation, it is imperative that we reflect on strategies that would maximize their contributions to national development as part of our activities aimed at catalysing further growth of the Nigerian economy, given that a vibrant and growing SME sector also offers a viable alternative that would aid job creation in our rural and urban communities.

However, for SMEs to contribute maximally to economic growth and inclusive development, they would need to fully harness the benefits of a knowledge-based and digital economy. As the effects of the COVID-19 pandemic has shown, countries that had strong digital ecosystems were better able to withstand the effects of restrictions on movements, as business activities were conducted using online digital platforms. In addition, educational institutions were able to leverage similar digital channels in order to prevent significant interruptions in providing quality learning to their students. Countries that did not have these same services were at a disadvantage.

In the 21st century we have witnessed ground-breaking innovations and growth in several countries, stemming from significant investments in building a knowledge-based system that enables greater application of technologically driven research and innovation. Technology is not only reshaping how knowledge is shared, but also how goods and services are produced and traded. It is also redesigning the various modes of payments for goods and services towards systems that enable faster and more efficient settlement of payment transactions.

Today, the emergence of digital platforms such as Amazon and Alibaba have provided SMEs with a significant ability to expand their operations by enabling them to sell and deliver their products to customers that are not within their immediate environment.

A digitalized and knowledge-driven economy can accelerate the growth and development of SMEs as well as create new opportunities to strengthen productivity, especially in the services industry. Countries such as India, China, Korea, and Singapore have continued to harness the benefits of the knowledge economy to accelerate economic growth, largely, through the contributions of SMEs. This therefore poses a challenge for Nigeria, such that to enable greater growth of our economy, we must work towards building a knowledge-based economy and enable SMEs to leverage digital channels in enhancing the growth of their operations.

Notwithstanding the benefits that a vibrant SME    sector provides, financial constraint has hindered SMEs from accessing innovative tools that could enable greater expansion of their activities as many of them remain trapped in our large informal sector.

In response, and in collaboration with key financial institutions, the CBN has deployed several measures aimed at improving access to finance for SMEs in order to enable greater expansion of their operations. Some of these activities include enabling SMEs to leverage their movable assets to obtain capital from financial institutions, and the development of credit reporting agencies, which would encourage SMEs to maintain good credit ratings in order to obtain access to credit at relatively lower cost from financial institutions.

The current economic situation in Nigeria requires an accelerated adoption of knowledge to drive our developmental goals. The fast pace of growth and innovation in the digital space along with the large and growing population of vibrant youth places Nigeria on a vantage position to harness this potential for accelerated economic development. In this regard, our educational institutions and key institutions including the Central Bank of Nigeria, have critical roles to play in realizing the huge potential of a digitized economy.

Many advanced economies have shifted focus from the adoption of traditional factors of production including labour and capital to a technology-driven development model, resulting in improved economic development indices. However, for emerging and developing economies like ours, a lot of efforts are still required to maximize the use of cutting-edge technologies and highly skilled human capital in fast-tracking national development.

For Nigeria to tap into the productivity-enhancing benefits of a knowledge-driven economy, training of quality manpower through both formal and informal educational curricula is essential. Knowledge has become ubiquitous with the proliferation of digital channels. Our universities and learning institutions should be ready to tap into the educational trends that are significant drivers of productivity in advanced and emerging markets, in order to reshape our existing curriculum, enhance the learning experience of our students and foster innovation amongst the faculty and staff in our educational institutions.

Furthermore, enhanced collaboration between universities and players in key sectors of our economy such as Agriculture, Manufacturing and ICT are necessary to enable implementation of sound ideas generated from our universities. For instance, universities in most developing countries have little or no formal linkages to industry. This often arises from the implementation of training curricula that is irrelevant to the industry, thereby, resulting in the production of ill-equipped graduates. I would like to challenge our institutions of higher learning to ensure effective collaboration with industry players in key sectors of our economy, in the training of relevant manpower to minimize mismatches between the skills required by firms and the educational qualifications of our graduates.

Globally, SMEs are considered key drivers of industrialization and agents of socio-economic transformation.[1] In this digital age, they are recognized as the backbone of national and economic development due to their significant contributions to GDP, through employment generation and poverty eradication. They also promote investment and wealth creation, equitable income distribution, export promotion, technological innovation, industrial diversification and value addition to local content.

SMEs account for about 90 percent of total enterprises in most countries.[2] For instance, the OECD reports that 98 percent of Chinese firms are SMEs, contributing around 68 percent to exports and a whopping 60 percent to China’s GDP, while employing 75 percent of the Chinese workforce. The experiences of Japan, Korea, Indonesia, Philippines, Thailand, and Hong Kong are like China, with about 90 percent of their industries classified as SMEs. In South Africa, over 90 percent of businesses are SMEs, employing about 60 percent of the country’s workforce and contributing about 52 percent share of GDP.[3]

Available survey by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) indicates that Nigeria has over 40 million micro, small and medium scale enterprises. These enterprises are distributed among 5 main economic sectors namely, manufacturing, wholesale and retail trade, education, agriculture, and food services.[4] It is important to note that about 90 percent of these SMEs operate in the manufacturing sector, which influences nearly 50 percent of all industry employment.

Despite the strides recorded by SMEs, there are still challenges that hinder them from realizing their full potential in Nigeria. Some of these challenges include lack of access to capital; poor infrastructure, weak managerial and organizational skills; low adoption of technology and innovation and poor knowledge networks. In order to address these challenges, the role of government is vital, especially, in providing an enabling environment for greater growth of SMEs.

Providing support for SMEs to thrive is a win-win situation for both government and firms. While government could invest in infrastructure and provide other support to SMEs; SMEs in–turn create employment opportunities and pay taxes to government, which helps to support more inclusive growth of our economy.

Given the integral role SMEs could play in supporting the growth of our economy, the Federal Government has rolled out several policies such as the National Information Technology Policy with the establishment of the National IT Development Trust Fund (NITDEF). The fund is intended, to facilitate the provision of venture capital finance to the start-up of SMEs in the IT sector under the management of National Information Technology Development Agency (NITDA). In addition, the framework articulates strategies for empowering the labour force within the SME sector with necessary IT skills that will increase their productivity and facilitate exports through e-commerce.

Similarly, through the Nigeria Inter-Bank Settlement System (NIBSS), significant progress has been made in generating unique identity numbers for individuals and businesses. These numbers provide comfort to banks and financial institutions in the disbursement of credit and is helping to support the development of a credit scoring matrix, under which financial institutions can better assess the credit quality of current and prospective borrowers.

SMEs are also leveraging on the significant progress made by the CBN and NIBSS in enhancing our payments system, which has enabled real time settlement of payment transactions. Today several SMEs that showcase their products on major internet platform such as Facebook, Jumia and Instagram, have seen significant expansion of their respective businesses because of their ability to conduct business transactions online along with the presence of a robust payment system that enables instant payment for goods and services online.

The CBN has contributed significantly to the development of SMEs in Nigeria. Apart from galvanising policy support for SMEs development through its mandates, the CBN has rolled out massive developmental interventions in some critical sectors of the Nigerian economy, especially in agriculture, manufacturing and SMEs. Attention has also been paid to advancing knowledge and innovation through various initiatives targeted at promoting youth’s entrepreneurship, research and development. Some of the specific achievements that we have recorded in this area are highlighted below.

In terms of development finance interventions to directly support SMEs, the Bank has introduced several schemes and initiatives including the SME Credit Guarantee Scheme (SMECGS), Micro, Small and Medium Enterprises Development Fund (MSMEDF), Youth Entrepreneurship Development Programme (YEDP) and Agri-business/ Small and Medium Enterprises Investment Scheme (AGSMEIS). Others are the Entrepreneurship Development Centres (EDCs), National Collateral Registry (NCR), Creative Industry Financing Initiative (CIFI), Targeted Credit Facility (TCF) and the Nigeria Youth Investment Fund (NYIF).

One of the most recent schemes targeted at channelling low-interest wholesale funds to the MSME segment is the Small and Medium Enterprises Development Fund (MSMEDF). This scheme, which charges 9% interest rate has recorded the disbursement of over ₦83.9billion to 216,704 beneficiaries at end of 2020. The obligor limit ranges from ₦500,000 for micro enterprises to ₦50 billion for SMEs financed by DMBs/DFIs. Also, the initiative offers 10% of the total loans for start-up businesses, 2% to economically active persons living with disabilities (PLWD) and 60% of the Fund’s wholesale component dedicated to women entrepreneurs or women led MSMEs in order to promote financial inclusion.

Another intervention is the Agri-business/SME Investment Scheme (AGSMEIS), an initiative of the Bankers’ Committee, in collaboration with the CBN was also set up to improve access to affordable and sustainable finance by agri-businesses and MSMEs. This will enhance the creation of productive employment opportunities and boost the managerial capacity of agri-businesses and MSMEs. So far, a total of ₦111.7 billion has been disbursed to 29,026 beneficiaries.

Furthermore, a ₦50billion Targeted Credit Facility was introduced in March 2020 as a stimulus package to cushion the effects of COVID-19 pandemic on households and MSMEs across the country. So far, under AGSMEIS and our targeted credit facility, over ₦111.7billion and ₦253.4billion have been disbursed to 29,026 and 548,345 beneficiaries, respectively.

The Central Bank also launched several youth investment-friendly programmes and interventions to empower Nigerian youths with necessary inputs to build successful SMEs and other businesses. One of such schemes is the Youth Entrepreneurship Development Programme (YEDP) which was launched in 2016 to enhance the deployment of the ingenuity and resourcefulness of Nigerian youths to achieve maximum economic development. Under the scheme, a total of ₦173.4 million has been disbursed to over 67 beneficiaries.

The target beneficiaries are members of the National Youth Service Corps (NYSC), non-NYSC (but with not more than five years post-NYSC), holders of verifiable tertiary institution certificates, and artisans with First School Leaving Certificate or a technical certificate or accredited proficiency certificate from the National Board for Technical Education (NBTE). Relatedly, the Federal Executive Council on the 22nd of July 2020 approved the sum of ₦75 billion for the establishment of the Nigeria Youth Investment Fund (NYIF) for the period of 2020 – 2023 to be funded by the CBN. The objective of NYIF is to improve access to finance for youth and youth-owned enterprises for national development. Under the scheme, ₦2.04billion has been disbursed to 7,057 beneficiaries, of which 4,411 were individuals and 2,646 SMEs.

Furthermore, the Bank established the Creative Industry Financing Initiatives (CIFI) aimed at improving access to long-term, low-cost financing to entrepreneurs and investors. It covers a wide range of sub sectors in the creative industries, some of which include, movie and music production, fashion and ICT. Among the target opportunities is the graduate software development loan. While the disbursement is in phases, in line with the agreed milestone, a sum of ₦3.1 billion has so far been disbursed to 341 beneficiaries.

Another area championed by the Bank towards SMEs development relates to entrepreneurship and youth training. The Central Bank of Nigeria [CBN] in 2006 in collaboration with Small and Medium Enterprises Agency of Nigeria (SMEDAN), National Directorate of Employment (NDE), National Poverty Eradication Programme (NAPEP) and Industrial Training Fund (ITF), began the establishment of Entrepreneurship Development Centre [EDC] across six geo-political zones of Nigeria. The centres were mandated to develop entrepreneurship spirit amongst Nigerians and provide insight into the tools, techniques, and framework for managing all functional areas of business enterprise, including production, marketing, personnel, and finance. These initiatives have significantly helped to bridge the skilled labour gap among SMEs.

Furthermore, the Bank has provided substantial support to some selected higher institutions in the country in order to enhance training, and quality. This formed the basis for the construction of centres of excellence in eight Universities across the country, two of which have been completed, with others at various stages of development.

Finally, the Central Bank has prioritized financial inclusion as a deliberate strategy to reduce the percentage of adults excluded from financial services. This is intended to increase the access to finance for households and SMEs. To achieve increased financial inclusion, the revised strategy focuses on areas with significant gaps in inclusion rates


As SMEs continue to play strategic roles in strengthening national economies and creating jobs, the catalytic roles of knowledge and innovation is essential for delivering more inclusive growth.  With the abundant resources at our disposal, including a large population of over two hundred million (200 million), natural resources and favourable climate among others, extensive measures must be put in place to accelerate the development of the economy and to make it more globally competitive. In this regard, the following policy options should be considered.


  • Special consideration should be given to the strengthening of physical and ICT infrastructure to enable SMEs perform more efficiently and become globally competitive.


  • Increase efforts towards accelerated diffusion of technology among SMEs. As users of new technologies, policies should incentivise the adoption of innovations that will improve SMEs competitiveness and productivity.


  • Deepening reforms that improve human capital development through skills enhancement and proper linkage of research to industry will improve the performance of SMEs.


Increased access to finance for start-ups and SMEs is highly essential. In this regard, the CBN stands ready to increase its development finance interventions to further support the sector.


Distinguished Ladies and gentlemen, in closing, let me state that the role of SMEs in contributing to employment and economic development across the globe is highly acknowledged. However, SMEs’ potential in enhancing economic growth is grossly hampered by limited access to finance, inadequate infrastructure, and poor digital penetration. Addressing these challenges require increased support of government and the private sector. The CBN through its development finance interventions has introduced several schemes and policy initiatives to support the growth and productivity of SMEs sector. Despite these efforts, the Bank stands ready to continue to push the envelope further and keep looking at innovative and nimble ways to put our SMEs on the pedestal of greatness, especially in the age of a burgeoning digital and knowledge-based economy.


Let me remind you that the University of Lagos has given you all that you need to conquer your world; go, therefore, and rule your world! . In Nigeria today, the opportunities are immense for you to develop and harness your entrepreneurial talents, using available digital technology; not only to create jobs for yourselves but also through you, create jobs for many others. In doing these, you play your part in National economic development. In the spirit of one famous American President, I challenge you today to ask not what Nigeria can do for you. Rather, ask what you can do for Nigeria.

Being remarks by the Governor of Central Bank of Nigeria, Mr Godwin I. Emefiele at the 51st Convocation of the University of Lagos, recently.


– Being remarks by the Governor of Central Bank of Nigeria, Mr Godwin I. Emefiele at the 51st Convocation of the University of Lagos



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