By Mohammed Nasir Ibrahim Esq.

Building a house is quite similar to growing a successful business. Both require the
utmost care, accountability, responsibility, and sensitivity. Because simply putting
a brick in the wrong place could cause the unfortunate collapse of the entire
structure.

The Micro, Small and Medium Enterprises (MSME) sector is the engine
room of major advanced economies, as well as key contributors to employment,
economic and export growth. MSMEs represent about 90% of businesses and more
than 50% of employment worldwide 1 . A survey by the Small and Medium Scale
Development Agency and the Nigerian Bureau of Statistics in 2020 reveals that
Nigeria’s MSMEs contribute nearly 50% of the country’s GDP and account for
over 80% of employment in the country 2 . Despite the significant contribution of
MSMEs to the Nigerian economy, challenges still persist that hinder the growth
and development of the sector including multiplicity of charges and taxes, a dearth
of skilled manpower and the general high cost of doing business. Hence, it takes
only the extremely lucky and the well-directed and planned businesses to survive
the harsh realities of the Nigerian business environment.

What are MSME’S?
The definitions of MSME are usually derived in each country, based on the
realities on ground and the roles it plays in the economy around, which policies
and institutions empowered to oversee the sector design programs. For instance, a
small business in the developed economies of countries like Japan, Germany and
United States of America (USA), may be a medium or large-scaled business in a
developing economy like Nigeria. More so, the definition of SME also varies due
to size, sector of economy with size been the most relied upon variable for making
the distinction. In Nigeria, MSMe’s (Micro, Small and Medium Enterprises) have
been defined to be those having employees within the range of 0-199 and assets
(excluding lands and buildings) within the range of N 0- 500 Million. 3 With over
40 million MSME’s in Nigeria 4 , only a handful are able to grow and scale into a
functioning and sustainable business venture having the requisite structures, and
standards to transcend beyond the life of the founder(s).

Indeed, SMEs are fast becoming the dominant form of business ventures in the
African continent. With high unemployment rates, people are turning towards
informal and formal small businesses to sustain their livelihood. They tend to
dominate the corporate community of most countries at least, in terms of company
registrations 5 In fact, most business owners do not have the mindset at the initiation
stage to establish a business capable of remaining sustainable even after their
death; most are sadly obsessed with the idea of an enterprise just been able to meet
their ends i.e., make ends meet, whilst they live and no more.
Thus, there is need to re-focus the minds of entrepreneurs intending to enter the
field to look beyond the horizon of their existence, at the helm of affairs, and to go
in with the intention of building an enterprise that will continue to live even after
they step down will be necessary for healthy economic growth. Hence,
entrepreneurs need to entrench basic principles of corporate governance as they
grow their businesses. Corporate governance framework is scalable and can be
applied to a wide range of businesses at various stage of their development. Once
the frameworks are laid on ground, which promote the triple objectives 6 of
transparency, fairness and accountability, its growth will continually re-align with
the stage of the business growth. This will make such business a potential viable
and sustainable profit-making enterprise. Corporate Governance (CG) should
become an integral business culture and way of working.
Broadly, corporate governance refers to the system by which corporations or
businesses are directed and controlled (this is as defined in the Cadbury Report,
1992 7 . The governance adopted by a business structure specifies the distribution of
rights and responsibilities among different participants, and specify the rules and
procedures for making decisions relating to the business. It refers to the set of
processes and customs affecting the way a corporation is administered and
controlled. It is a farce to think that corporate governance frameworks are
applicable only to large public companies having a board of Directors,
Shareholders, Investors, and other stakeholders. Though, ordinarily, the existence
of a board of directors is the key pillar of business governance, those businesses
devoid of a board still requires a clearly defined decision-making structure, which
will help to provide accountability, oversight and above all, ensure continuity of
the business organization. Corporate governance is indeed relevant for all

businesses regardless of size, complexity, or sector. The adoption of corporate
governance will depend on what the owner wants to achieve 8 .
Some of the advantages of adopting Corporate Governance by MSMEs include:
An effective and reliable corporate governance framework/mechanism that is
backed up with adequate monitoring would eliminate financial scandals and curb
corporate failures; Its enables MSMEs to access loans and other credit facilities
easily as financial institutions are more likely to trust business with clearly defined
structures than those without one; It Raises the standards of performance and
drives reforms for corporate and business growth and also readily provides an
assessment framework for regulators, investors etc.

Principles to adopt by MSMEs while setting up a Corporate and Business
Governance structure
Most businesses start with family members/friends as their initial employees and
tend to impose roles without any consideration as to the qualification and
capability of the individuals. Further, when the business progresses, there becomes
the need to introduce formality in the decision-making process. To avoid
bottleneck and business threats, the following modified governance principles
should be incorporated by the business. The business/owner should;
1. draw up a business and strategy plan,
2. maintain financial records in-house or out-source a professional accounting
service,
3. develop a budget model that fits your business and stick to it,
4. separate business account from the owner’s account,
5. clearly articulate and define business policies and procedures (ensuring
internal control efficiency),
6. ensure periodic financial and managerial audit of accounts and procedures,
7. develop structures to manage employees and ensure accountability,
8. infuse meaningful technology as much as possible into the businesses’
operations,
9. ensure that all agreements, are properly drafted and vetted,
10. there should exist a clear authority hierarchy that flows seamlessly, and

11. develop internal bye-laws, charters etc. to ease governance etc.
Whilst it is given that the business environment is plagued with a plethora of
problems including multiple taxation, duplicity of laws, inconsistent government
policies, lack of sufficient raw material and valuable skilled labour. An efficient
control system ensures business growth and development. it further ensures
openness and transparency which in turn makes it easy for a business to amongst
other things, grow, expand into and acquire newer markets, develop deeper
partnerships and also makes it easy to acquire funding.

1 The International Day of Micro, Small and Medium Enterprises MSMEs)
https://unctad.org/osgstatement/international-day-micro-small-and-medium-enterprises-msmes assessed
3/19/21
2 PWC’s MSMEs survey 2020; https://www.pwc.com assessed 3/19/21
3 National Policy on Micro, Small and Medium Enterprises https://www.smedan.gov.ng/images/PDF/MSME-
National-Policy.pdf assessed 3/17/21
4 Deepening access to capital for Nigerian MSMEs during a pandemic https://www.brookings.edu/blog/africa-in-
focus/2021/03/08/deepening-access-to-capital-for-nigerian-msmes-during-a-pandemic/ assessed 3/17/21
5 Almona, C., Corporate Governance for small and medium sized businesses in African economies, Author House
2020
6 Ibid
7 The Cadbury Report 1992: Shared Vision and Beyond; http://wwwdata.unibg.it/dati/corsi/900002/79548-
Beyond%20Cadbury%20Report%20Napier%20paper.pdf assessed 3/16/21
8 Ibid

 

Mohammed Nasir Ibrahim Esq.
0813-737-4044
[email protected]