SMEs, AGRICULTURE AND ECONOMIC GROWTH
Before the oil boom, agriculture was a major National Income (NI) earner through cash crops such as rubber, palm produce, cocoa and groundnuts. According to Adeyemi & Abiodun (2014), the agricultural sector thrives on SMEs. The two sectors offer over 90% of total jobs in Nigeria, contribute immensely to GDP growth, and present policymakers with the most-feasible economic diversification option, especially since early 1970s, when FG recognized SMEs as a tool for industrialization and rural development. Okon and Edet (2016) noted that the SME sector does not only impel economic growth but promotes productivity and self-reliance through entrepreneurship.
The golden era of SMEs in Nigeria started in early 1980s, when FG established the Nigerian Bank of Commerce (NBCI) and Nigerian Industrial Development Bank (NIDB) to develop small and medium-scale industries. This innovative strategy transformed the SME sector with unprecedented improvements in foreign exchange, technological development, and production of raw materials for exports and local manufacturers. Banks offered financial credits to entrepreneurs on a 7-year repayment plan, with meagre interests collected as loan-servicing amounts. NBCI and NIDB provided businesses with working capital while SME promoters spent equities from capital investment on real estate (Acha., 2009). Resultantly, exchange rate between the U.S. dollar and Naira stood at $1:65 kobo. In addition, capacity utilization and the Import Substitution strategy also increased GDP growth by nearly 74% (Arriyo., 1999).
The collapse of SMEs in Nigeria was attributed to currency devaluation as a result of austerity measures recommended by the International Monetary Fund (IMF) in 1986. A decline in foreign exchange, production of raw materials, and purchasing power of the Naira were some of the negative impacts. Bankruptcy and undercapitalization of SMEs followed, leading to inactivity in the real sector, unemployment, low capacity utilization and excessive dependence on importation. Eventually, the Nigerian economy became a dumping ground for other countries (Ayyagari et al., 2003).
According to Korsgaard et al (2016), policymakers have a responsibility to formulate and implement innovative strategies that are capable of maximizing factors in the socio-economic and political environments. To successfully transform the SME sector for economic growth and sustainable development, each country must adapt to specific and unique policies.