The small and medium scale industries equity investment scheme in Nigeria: a critique

The introduction of the Small and Medium Scale Industries Equity Investment Scheme in Nigeria represents the most recent experiment aimed at promoting this sector of the economy that is vital for sustained economic development in the country. This paper attempts a critique of this new Scheme. It argues that the main reason why SMEs have been unsuccessful in Nigeria has been because of the unstable macroeconomic environment and the dearth of basic infrastructure. This has made their cost of operations unacceptably high, relative to their capital base. Furthermore, the belief that banks have better management structures and experience is erroneous. Huge bank profits are more a consequence of government subsidy of these banks via the foreign exchange market, rather than the consequence of their sound management. Even banks that have good management skills may not necessarily have the necessary experience to manage SMEs. In fact, this could end up being an unwelcome distraction from their main business of banking.