Financial Reporting Council of Nigeria Unveil Governance Guidelines for SMEs
In an effort to enhance the corporate governance of Small and Medium Enterprises (SMEs) in Nigeria, the Financial Reporting Council of Nigeria (FRC) has partnered with Integrity Organization, the United Nations Global Compact Network Nigeria (UNGC NN), and has received backing from the MacArthur Foundation to introduce a set of new guidelines. These guidelines, while not mandatory, seek to support SMEs in formalizing their operations, establishing strong business frameworks, and ensuring their long-term sustainability even after the founders’ involvement.
SMEs play a crucial role in Nigeria’s business landscape, accounting for 96% of businesses and generating around 84% of employment in the private sector. Despite their significance, many SMEs face challenges that lead to high failure rates. The SMEDAN National MSME Survey report (2017-2021) highlighted the loss of over 2 million MSMEs, attributing the issues to inadequate record-keeping and the absence of a business plan, rather than just funding shortages.
Corporate governance is recognized as a vital factor that influences the growth and sustainability of SMEs. Poor governance can hinder SMEs’ access to capital and impede their expansion, especially for family businesses that struggle to thrive beyond the founder’s tenure.
SMEs that follow these new guidelines, as part of the UNGC NN, will have access to free and subsidized technical and funding opportunities. This support aims to reduce the cost of governance and enhance business sustainability. The guidelines cover various important areas, including:
- Board Structure and Responsibilities
- Transparency and Disclosure
- Risk Management
- Stakeholder Engagement
- Ethical Conduct and Compliance
- Corporate Governance Policies and Procedures
- Succession Planning.
The introduction of the SME corporate governance guidelines is a big move in enhancing the sustainability and growth of SMEs in Nigeria. Following these guidelines can help SMEs succeed, secure funding, and thrive in the market for a longer period. You can access and download the SME CORPORATE GOVERNANCE DOCUMENT HERE
