By Busola Bamidele
With millions of Nigerians living below the $2.15 per day extreme poverty line, small and medium enterprises (SMEs) have emerged as a crucial solution to job creation and economic empowerment.
In a country where unemployment and inflation remain major challenges, supporting SMEs could be the key to reducing poverty and improving livelihoods.
The Role of SMEs in Poverty Reduction
SMEs contribute 48% of Nigeria's GDP and employ over 80% of the workforce, according to SMEDAN. These businesses provide opportunities for low-income individuals to earn a living, either as employees or entrepreneurs.
Unlike large corporations, SMEs are more accessible, requiring lower capital to start and offering flexible employment options.
Key Ways SMEs Can Alleviate Poverty
1. Job Creation: Small businesses generate employment for millions, helping families afford basic needs and escape extreme poverty.
2. Skill Development: Many SMEs offer on-the-job training, equipping workers with skills that can lead to higher wages and better opportunities.
3. Access to Affordable Goods & Services: Small businesses cater to low-income consumers by providing essential goods at lower prices compared to big retailers.
4. Financial Inclusion: Many SMEs engage in informal finance systems like cooperative savings, giving poorer Nigerians access to credit for business expansion.
5. Rural Economic Growth: SMEs in agriculture, retail, and manufacturing are key in rural areas, helping to decentralize economic activities from major cities.
Challenges Facing SMEs in Fighting Poverty
Despite their potential, SMEs struggle due to:
Lack of funding – Many businesses fail due to limited access to credit.
Poor infrastructure – High energy costs and bad roads increase production expenses.
Unstable policies – Frequent policy shifts discourage investment in small businesses.
What Needs to Be Done?
To maximize the impact of SMEs on poverty reduction, the government and private sector must:
Increase access to SME funding through grants, low-interest loans, and microfinance.
Improve electricity supply to reduce production costs.
Encourage entrepreneurship education to equip young people with business skills.
Support local manufacturing to create more jobs.
Conclusion
SMEs are Nigeria's greatest tool for economic empowerment and poverty reduction. By addressing the challenges facing small businesses, more Nigerians can earn sustainable incomes and move beyond the extreme poverty threshold. If well-supported, SMEs can transform lives and drive economic growth across the country.
