With over 40 million micro, small and medium enterprises (MSMEs) contributing nearly 50% of the national GDP; accounting for over 84% of total employment as well as 96% of businesses in Nigeria, the MSME sector is undoubtedly the backbone of the Nigerian economy. However, a vast majority of these MSMEs operate informally without proper registration or access to finance and other critical support services. And this has significantly stifled their growth potential and broader contribution to sustainable economic development.
Nigeria’s economic potential has long been touted, but unlocking it requires a concerted effort from both public and private actors. The recent partnership between the Corporate Affairs Commission (CAC) and Moniepoint Microfinance Bank offers a promising example of such collaboration, holding valuable lessons for the nation’s future economic development.
The partnership will see the government, through the CAC, leverage its regulatory expertise and reach to facilitate business registration. Moniepoint MFB, Nigeria’s definitive bank for small and medium-sized businesses, brings its financial inclusion experience and technological capabilities to the table. This synergy creates a win-win situation for all stakeholders. The initiative aims to register a staggering 2 million small businesses, marking a significant step towards formalizing the vast, yet often informal, small business sector. This formalization not only fosters compliance and transparency but also opens doors to critical resources like funding and market opportunities. This, in turn, empowers small businesses to contribute more meaningfully to job creation and national growth.
This piece will attempt to show how by promoting formal registration and financial inclusion of MSMEs, the partnership model catalyzes broad-based economic growth for the giant of Africa.
First, formal registration of MSMEs enables improved access to finance and credit facilities that will spur business expansion. It is widely known that access to credit is in the top two needs for business growth and survival for MSMEs. With documented proof of business registration and financial records, small enterprises can leverage collateral to obtain loans and reduce overreliance on personal savings or limited family funds.
Second, integrating MSMEs into the formal economy expands the tax base for improved revenue mobilization. Broadening tax contributions from small businesses creates fiscal space for public investment in critical infrastructure and social services. Nigeria clearly needs to diversify its revenue base and this is a sure-fire way to boost non-oil contributions to the nation’s economic pot of soup.
Third, formalization fortifies and strengthens the capacity of MSMEs to access markets and participate in both local, regional and global value chains. Market access and trade facilitation are critical pillars for the AFCTA gaining traction. Registration confers legal status and credibility needed to enter procurement contracts, export markets and business partnerships.
Fourth, integration into the formal economy provides MSMEs a foundation to adopt better record keeping, financial reporting and governance practices that are pivotal for efficiency, productivity and long-term viability. It goes without saying that most MSMEs are partly unable to access credit because of poor bookkeeping practices. Formalization pushes them to adopt and raise their standards which in turn provides them with the footprints needed to take giant strides.
Fifth, formalization allows for better tracking of real economic performance and employment metrics for evidence-based policy interventions that address binding constraints facing MSMEs. Anything that isn’t tracked and measured can’t be optimized for success.
It is heartwarming to see the government’s commitment to this initiative which is further underscored by the statements of Dr. Uzoka-Anite, Minister of Industry, Trade and Investment. Her emphasis on collaboration, access to capital, and creating an enabling environment resonates deeply with the aspirations of small businesses. Additionally, her acknowledgment of Moniepoint’s innovative approach and openness to deeper collaboration is a testament to the government’s understanding of the crucial role private entities play in fostering economic growth.
It is equally important to signpost Moniepoint’s role and give the financial institution its flowers. The organization’s oft-stated mantra of “powering dreams and creating a society where everyone experiences financial happiness” aligns perfectly with the government’s goals of financial inclusion, job creation, and poverty alleviation. Their ambitious target of onboarding 30 million businesses with the CAC in five years demonstrates their commitment to creating a lasting impact on Nigeria’s economic landscape.
In conclusion, the CAC-Moniepoint initiative provides a valuable and sustainable model for strengthening the building blocks of Nigeria’s economic base through MSME formalization. If implemented with prudent policies, this partnership can catalyze structural transformation, boost job creation for Nigeria’s burgeoning youth population and accelerate inclusive and sustainable industrial development. I think it’s alright for us to raise our glasses and cheers to moving Nigeria forward on a glorious path towards sustainable growth, shared prosperity, and empowerment for all.
Babatunde Olofin, is the Managing Director, Moniepoint Microfinance Bank. He is a digital innovator, entrepreneur and experienced banker with over two decades of experience in digital financial product management.
