In collaboration with Integrity Organization, the United Nations Global Compact Network Nigeria (UNGC NN), and with support from the MacArthur Foundation, the Financial Reporting Council of Nigeria (FRC) has introduced new guidelines aimed at enhancing the corporate governance of Small and Medium Enterprises (SMEs) in Nigeria. While these guidelines are non-compulsory, they seek to formalize SMEs, establish strong business frameworks, and ensure continuity beyond the founders’ tenure.
SMEs play a vital role in Nigeria’s business landscape, constituting 96% of businesses and generating approximately 84% of private sector employment. However, many SMEs encounter challenges leading to high failure rates, often attributed to inadequate record-keeping and the absence of business plans, rather than solely funding shortages. Corporate governance is recognized as a pivotal factor affecting the growth and sustainability of SMEs, with poor governance potentially hindering access to capital and impeding expansion, particularly for family businesses striving to endure beyond the founder’s leadership.
The new guidelines offer numerous benefits for compliant SMEs, including access to free and subsidized technical support and funding opportunities through their affiliation with the UNGC NN. Covering critical areas such as board structure, transparency, risk management, stakeholder engagement, ethical conduct, compliance, and succession planning, these guidelines aim to reduce governance costs and bolster business sustainability.
To ensure widespread understanding and implementation of these principles, stakeholders like the Lagos Chamber of Commerce and Industry (LCCI) and Fidelity Bank are taking proactive measures. This includes offering training sessions in accessible languages, incorporating the guidelines into Fidelity Bank’s SME Hub, and collaborating with LCCI to promote awareness of the benefits and practices of sound corporate governance.
Stakeholders emphasize the collaborative approach in developing these guidelines, stressing its benefits for both SMEs and the broader economy. Training and capacity building are deemed essential to facilitate SMEs’ adoption of governance practices, particularly for family-owned businesses. These guidelines provide a framework for sustainable decision-making, integrating both family and business values, thereby enhancing SMEs’ resilience and longevity in the market.
The launch of these SME corporate governance guidelines signifies a significant advancement in fostering the sustainability and growth of SMEs in Nigeria. By embracing these guidelines, SMEs can enhance their competitiveness, improve access to capital, and ensure their long-term viability and resilience in the business landscape.
