In Nigeria, businesses can be in three major sizes. Still, these sizes do not affect the persons that formed it. This implies that a company can be a small-size business and it is possible for a sole trader to be a large-size business. These are referred to as SMEs. In this article let’s read on sizes of businesses as it is in Nigeria.
In Nigeria, small-sized entities are those that have gross revenue of less than 25 million Naira. There are other criteria as well. A small business may also have an employee base that is fewer than 100 persons. These firms can be registered as a business name or as a company.
A mid-size business is a business with gross revenue of more than 25 million Naira and less than 10 million Naira. Medium-sized entities can be listed in an Over Counter (OTC) Market. This market is similar to a stock exchange market. How? Businesses can use the platform to raise capital. An example is the Nigerian Association of Security Dealers (NASD) OTC.
NASD Market Performance as at the close of the OTC Market today, Tuesday May 11, 2021.#Equities #Trades #securities #StockMarket #NASDOTC @BBoason @itempili @FrontierAFR @proshare pic.twitter.com/kFlB7bNskC
— NASD OTC Exchange (@NASDNG) May 11, 2021
Businesses in this category have a revenue base of above 10 million Naira. Here, the entities may be listed in a stock market or an OTC. More so, the business may also be a private or public company. It is hard to see a sole trader’s business be large.
Why classifying business as SMEs important
This helps differentiate boys from men. Knowing that a business earning more than 25 million Naira as revenue makes it a medium-size firm has helped you differentiate it from other small entities.
With this distinction, it is easy for the government to give incentives to small businesses. Government can give tax waivers, set tax policies that will favor small entities. They can also issue incentives through banks and other development institutions (for example, banks of industry) to small firms.
In addition, investors can know where to invest their funds. They can also diversify their portfolio by investing in all types of businesses based on size.
In conclusion, size-based entities are small, medium, and large businesses. Each of these can be identified based on the revenue earned. Furthermore, it is important to classify businesses based on sizes to help the government know which business type needs incentives and tax waivers.