The thank-you photo is posted. The grant money comes in. And six months later, the shop is closed. It’s a cycle, Dr. Seyefar Clement says he has seen too often. As an SME finance expert and principal lecturer at the University of Bedfordshire, he argues the issue isn’t always a lack of capital.

In Nigeria, SMEs account for 96% of businesses and employ millions of people. Yet many struggle because support is often viewed as free money rather than capital meant to grow, be repaid, and fund the next entrepreneur. To Dr. Clement, the analogy is simple: if a water bottle is never refilled, everyone eventually goes thirsty.

In this interview with MARY NNAH, ahead of World SME Day, celebrated annually on June 27, Dr. Clement shares a decade of hard lessons from advising SMEs across Nigeria and the UK. He points to mindset as the missing piece. He notes that without financial literacy, accountability, and support targeted at real community needs, even the most promising hustles break. For him, turning Nigeria’s everyday entrepreneurs into lasting businesses will take more than cheques. It will take a shift in how growth is approached.

How would you simply explain what an SME is, and why it matters to an economy?

SMEs, which stand for Small and Medium-sized Enterprises, are businesses that are larger than micro-enterprises but smaller than large corporations. They can be found in virtually every sector of the economy, including retail, agriculture, manufacturing, technology, logistics, and professional services.

SMEs are the backbone of any economy because they create jobs, stimulate innovation, support local communities, and contribute significantly to economic growth. In Nigeria, their importance is even more pronounced. According to recent estimates, MSMEs account for approximately 96% of businesses in the country and remain a critical driver of employment and economic activity.

Their success has a direct impact on the well-being of millions of Nigerians. When SMEs grow, they create more jobs, generate income, increase tax revenues, and contribute to poverty reduction. Conversely, when they struggle, the effects are felt across households, communities, and the wider economy. This is why supporting SMEs through targeted initiatives, improved access to funding, and better financial literacy is essential for Nigeria’s long-term economic development.

What are the key challenges you think SMEs in Nigeria are facing today, and why?

Several challenges certainly exist for SMEs in Nigeria. It is important to identify them because Nigerians are naturally entrepreneurial and have the capacity to drive significant economic growth if some of these barriers can be addressed.

One of the biggest challenges is access to finance. Despite the critical role SMEs play in the economy, many still struggle to access affordable funding. This is due to several factors. First, there is limited financial literacy. Some SME owners lack the knowledge required to secure funding, manage it effectively, and deploy it in ways that support sustainable business growth.

There is also the issue of limited funding and support reaching SMEs at the scale required. While the government has established agencies and programmes to support small businesses, funding constraints and implementation challenges often limit their impact. In addition, Nigeria’s credit information infrastructure for small businesses remains relatively underdeveloped. Unlike large corporations, many SMEs do not have readily available financial records or established credit histories, making it difficult for lenders to assess their creditworthiness and extend credit with confidence.

Another challenge is the politicisation of some SME support programmes. In some cases, funding is influenced by political considerations rather than business viability. This can create a situation where beneficiaries view the funds as a gift rather than capital intended to support enterprise development and economic growth.

That said, it is not always the government’s fault. The sustainability of SME financing programmes also depends on the repayment behaviour and performance of the businesses that receive support. A useful way to think about this is to imagine a refillable water dispenser. To continue drawing water, the bottle must be replaced when it is empty. In the same way, when SME loans are repaid, those funds can be recycled to support new businesses. However, when repayment rates are poor or businesses fail, the pool of available capital shrinks, limiting the ability of government and financial institutions to support future entrepreneurs.

Beyond finance, SMEs also face challenges relating to inadequate infrastructure, rising operating costs, inflation, and economic uncertainty. Addressing these issues is critical because MSMEs account for approximately 96% of businesses in Nigeria and remain a major driver of employment and economic growth.

We have seen several private-sector initiatives in Nigeria, such as the Tony Elumelu Foundation and similar programmes, providing grants and support to entrepreneurs. What do you make of the impact of these private-sector-driven interventions?

These avenues are definitely helpful. They serve as additional sources of capital for new and existing SMEs. Several individuals and organisations are making similar contributions. For example, the Kestin Pondi Foundation reportedly commits significant resources each year to support SMEs and entrepreneurs.

These platforms demonstrate how individuals and private institutions can help bridge the funding gap facing small businesses. Importantly, they do not simply provide money; they also invest time and resources in assessing applicants and evaluating the viability of their business ideas. This helps ensure that support is directed towards individuals who are genuinely committed to building sustainable businesses.

However, one of the limitations of some of these interventions is that the support is not always end-to-end. Unlike programmes such as the Tony Elumelu Foundation, which combine funding with training, mentoring, networking, and ongoing support, many initiatives focus primarily on disbursing capital. To improve the chances of success, grant providers should consider offering more structured mentorship, business development support, and post-funding monitoring. Access to capital is important, but entrepreneurs are far more likely to succeed when funding is complemented by guidance, accountability, and continuous support.

In the past year, we have seen the institutionalization of regional development commissions by the Federal Government. Do you think these agencies are positioned to support and stimulate SME growth in ways the country hasn’t been able to do so far?

From what I have gathered about these commissions so far, I believe they have the mandate to support SMEs and are well-positioned to do so. In fact, the South East Development Commission (SEDC) has already launched initiatives aimed at supporting startups and entrepreneurship, while its counterpart in the South West has announced plans and investments geared towards driving regional development, including improvements to transportation infrastructure. The South South Development Commission, on the other hand, is still in its early stages following its inauguration and has yet to fully commence operations. However, I am hopeful that it will become fully functional soon and play a significant role in supporting SMEs and driving economic development across the South South region.

I mention these examples because SME growth should be viewed as more than simply injecting capital into businesses. Access to finance is important, but it is only one part of the equation. SMEs also need reliable infrastructure, efficient transportation networks, access to markets, stable power supply, and a business environment that enables growth. Support for SMEs should therefore encompass all the factors that contribute to enterprise development, and the regional development commissions have the potential to complement government efforts in this regard.

That said, these commissions must also invest in reorienting mindsets, particularly among beneficiaries of SME funding programmes. There needs to be a shift in how such support is perceived. In some cases, grants or funding are viewed as “free money” or as a reward for the effort involved in applying, rather than as capital intended to build sustainable businesses and create economic value.

The second challenge is ensuring that these programmes are not used as a vehicle for political patronage. Funding should be allocated based on merit, viability, and potential impact, rather than political affiliation or support. Capital provided to individuals who see it as free money is unlikely to generate the desired economic outcomes. More importantly, it diverts scarce resources away from entrepreneurs who could have used that support to build successful businesses, create jobs, and contribute meaningfully to economic growth.

Ultimately, the success of these commissions will depend not only on the amount of funding they provide but also on the quality of their governance, the transparency of their programmes, and their ability to create an environment in which businesses can thrive and grow sustainably.

Given the challenges facing SMEs, what do you consider to be the key catalysts for stimulating SME growth in Nigeria today?

I will mention three key elements.

First, government support and catalytic funding are critical. As I mentioned earlier, we have agencies that have been established to provide the technical and financial support SMEs need to grow, but many of them are not adequately funded. If we are serious about stimulating SME growth, these institutions must be properly resourced and empowered to fulfil their mandates.

Second, financial literacy is crucial. Business owners need to understand the fundamentals of running a business, including financial management, record-keeping, cash flow planning, and how to present a compelling case when seeking funding. This would help bridge the trust gap that often exists between SMEs and financial institutions, particularly banks, which remain one of the most important sources of financing for businesses.

The third catalyst is the introduction of a more effective structure for financing, monitoring, and measuring the impact of SME support programmes, whether government- or private-sector driven. Loans and grants should not simply be disbursed; they should be structured in a way that maximises their impact and increases the likelihood of business success.

Specifically, capital support should be more targeted. What often happens is that once a particular type of business is seen as profitable, everyone rushes into that space without first asking what problem the business is solving. Meanwhile, there are significant gaps and unmet needs in the market that present opportunities for innovation and sustainable growth.

Take the Niger Delta region as an example. Would it be more beneficial to fund yet another payment technology startup in an already crowded market, or to support a business that addresses a pressing regional challenge? There may be greater value in prioritising SMEs developing solutions in areas such as agritech, environmental sustainability, fisheries, and climate resilience. For instance, innovative technologies that help fishermen monitor fish migration patterns or optimise their fishing operations could create both commercial value and social impact.

The point is not that these are the only sectors deserving support. Rather, funding should be aligned with clearly identified needs and opportunities within a region or community. When support is targeted in this way, it creates a double benefit: businesses are more likely to succeed, while communities benefit from solutions to real economic and social challenges. In my view, this is how we can move from simply funding SMEs to strategically developing them as engines of economic growth.