The Financial Reporting Council of Nigeria has partnered with the Lagos Chamber of Commerce and Industry and the Centre for Business Integrity to drive good governance in Nigeria’s 40 million Micro, Small and Medium Enterprises.
The Executive Secretary of the FRC, Dr. Rabiu Olowo, at the event to promote the adoption of the Small and Medium Enterprises Corporate Governance Guidelines 2024 by Business Membership Organisations on Thursday in Lagos, said the adoption would promote the longevity of MSMEs.
According to reports, about 40 million MSMEs are operating in Nigeria, accounting for about 96 per cent of businesses and 84 per cent of employment, and contributing about 48 per cent to the national GDP annually.
In his keynote address titled ‘Governance as a Tool for MSMEs Longevity: The Impact of Partnership between Regulators and Enterprises,’ Olowo noted that Nigerian MSMEs are pivotal in driving innovation and are recognised not just as business entities but as engines for economic transformation and national development by the President Bola Tinubu administration.
He, however, highlighted that over 50 per cent of MSMEs in Nigeria fail in their first year of operation, while more than 95 per cent fail in their first five years of existence.
The FRC boss said, “This implies that new MSMEs are birthed every year, so why the early/premature death/extinction? Reasons for the early death include, but are not limited to, a lack of or limited access to funds, poor infrastructure, no or very low market demand for their products and services, weak succession planning, regulatory uncertainty, low adoption of formal business practices, over-dependence on the founder’s persona and operational involvement, and more. The most critical and foundational challenge is a lack of good governance structures and practices, which would easily have mitigated against the earlier listed challenges.”
He continued, “Good governance is essential for MSMEs to achieve longevity and sustainability. With good governance structures in place and implementation ensured, the MSMEs succeed in building trust with stakeholders; they can make informed decisions and manage risks (existing & potential) effectively. By adopting good governance practices, MSMEs can improve performance, increase transparency, and enhance accountability. The long-term survival of MSMEs through good governance practices is indicative of a positive impact on investors’ confidence, which will ultimately lead to a visible boost in investments generally. This aligns fully with one of the core/key objectives of the Council, which is investors’ protection,” Olowo noted that the adoption of the
SME Corporate Governance Guidelines 2024 will transform MSMEs and their contributions to the economy.
On FRC’s partnership with LCCI, the ES explained, “The overarching intention of FRC for MSMEs is predominantly developmental, recognising the fact that, from the MSMEs of today, business giants/conglomerates of tomorrow shall emerge. The partnership between FRC and LCCI, being witnessed here today, is a strategic move to promote good governance among MSMEs generally, but in particular, MSMEs who are member organisations of LCCI. We have it on good information that LCCI is desirous, committed, and poised to direct its members to adopt the SME CGG-2024 as its corporate governance reporting framework.”
The partnership is expected to result in improved access to information and capital, capacity building, and networking opportunities.
“The partnership between FRCN and LCCI has the potential to significantly impact the longevity and sustainability of MSMEs in Nigeria. Governance is not about ticking boxes, it’s about building enduring institutions. By promoting good governance practices, MSMEs can build trust with stakeholders, improve their performance, and increase their competitiveness. I urge all stakeholders to support this initiative and work together to promote good governance among MSMEs,” he concluded.
