The essential role of IP to SMEs in Nigeria

A successful IP system is crucial to the growth of small and medium enterprises in Nigeria, however, there are some major challenges hindering its development.

Small and Medium-scale enterprises (SMEs) are the result of continuous human innovation and creativity, which serves as the running engine through which the economy survives. They contribute immensely to the development of entrepreneurial skills amongst the population, employment generation, poverty elevation, structural transformation of rural areas, industrial spread, amongst others and therefore there is a need for these to be promoted and protected.

After Nigeria’s independence from the British colonial rule in 1960, SMEs were radically promoted by the Federal Government as a means of reducing the incidence of poverty and unemployment in the country with the adoption of several economic reform programs like the establishment of the Nigerian Industrial Development Bank in 1962 with a special unit that focused on SMEs financial requirements, the Small Scale Industries Credit Scheme, the World Bank SME I Loan Scheme and the World Bank SME II Loan Scheme in the 80s and 90s.

More recent programs like the establishment of the Bank of Industry to provide credit facilities to SMEs at an interest rate of 10 percent, the Small and Medium Enterprises Credit Guarantee Scheme in 2010, the Central Bank of Nigeria’s Real Sector Support Facility in 2014 and finally the establishment of the Entrepreneurship Development Centers in various parts of the country, were aimed to develop strong SMEs that can compete globally and contribute to the national growth and development.  

"According to the Nigerian Bureau of Statistics, small and medium scale enterprises (SMEs) in Nigeria have contributed about 48% of the national GDP in the last five years. With a total number of about 17.4 million, they account for about 50% of industrial jobs and nearly 90% of the manufacturing sector", as PWC Nigeria PME survey states. The Statistician-General of the Federation and CEO of the National Bureau of Statistics (NBS), Dr Yemi Kale, also revealed that 41.5 million Micro, Small and Medium Enterprises (MSMEs) were registered in 2017, which is a testament to the immense growth of SMEs and a crucial step towards building a flourishing and diversified economy.

However, instead of a slow chain of progress through many decades, IP can significantly accelerate the progress of SMEs, in order for Nigeria to attain a decent level of desired economic development, in line with its vision to be among the leading economies in the world by 2030.

"According to the Nigerian Bureau of Statistics, small and medium scale enterprises (SMEs) in Nigeria have contributed about 48% of the national GDP in the last five years." (in PWC Nigeria SME survey)

How IP Can Benefit SMEs  

• IP rights protect inventions and promote exclusivity to control and exploit their creations;
• IP enables SMEs to generate income from their innovative capacity and creativity through licensing, loan collaterals, commercialization of IP products and services which will encourage and help fund further innovations;
• IP rights can enhance the value of the SMEs to potential investors and financial institutions, considering that intangible assets ranging from inventions, brands, designs etc. are of immense value to both local and international community;
• IP rights help in distinguishing businesses in the marketplace, creating a brand identity that links the mind of the consumer to the products or services of the company;
• Registration of IP rights can deter potential infringement and in cases of infringement adequate penalties and compensation are sought after;

IP Challenges Faced by SMEs In Nigeria

Lack of adequate information on the relevance of IP to SMEs limits their ability to benefit from the IP system. We believe most SMEs in Nigeria are unaware of IP benefits due to the absence of informative seminars on IP, the non-incorporation of courses on IP in the curriculum of Nigerian universities, amongst other inherent challenges.

Most SMEs do not consider it necessary to protect their business due to its small size while viewing registration and protection as only necessary for big businesses with big inventions and trademarks, however, SMEs should protect every idea or invention from larger competitors who are in a better financial position to commercialize the product or services depriving the original creators of its benefits. For example, in the case of Ayman Enterprises Limited v. Akuma Industries Limited the judgment given by KaribiWyhte JSC held that “Right of action on passing off is statutorily based on Section 3 of Trade Mark Act 1965, which can only be available where there is an infringement of a trademark registered under the said Act”. SMEs risk the loss of exclusivity when they fail to protect their businesses.

Cost of Registration and protection of IP rights are perceived by most SMEs as an additional financial burden which most cannot afford, considering that majority of the costs are incurred before the product or services reach the market. An IP infringement hinders the essential growth needed by SMEs by undermining the confidence in the quality of the brand and its products or services. Piracy and counterfeiting is a major menace amongst businesses in Nigeria. Limited human resources and IP experts accessible to SMEs. An efficient IP management system requires an array of skilled experts ranging from legal to scientific, commercial, and technical and, unfortunately, there are very few IP firms and consultancies in Nigeria.

Possible Solutions

Having examined the IP challenges encountered by SMEs in Nigeria, below are some suggestions on how IP can promote the protection and development of the new industries as well as strengthening the old ones, with 3 examples of SMEs that have used IP rights to protect their businesses and to promote its growth.

- Public/private sector partnership to educate SMEs on their IP rights, and the ability to realize its commercial potential through technical training on IP, advertisement. IP should be inculcated into the curriculum of higher institutions, etc.

- Government should make policies that impact the market through the promotion of wider and effective use of the IP system, e.g., tax incentives for SMEs, a plethora of policies that create awareness of IP rights, customs regulations to promote conformity with global markets requirements, etc.

- IP strategies should be incorporated in the integral business strategy of SMEs to increase their potential market value.

- The cost of IP protection can be subsidized for SMEs to aid in the protection of their creativity.

- An IP enforcement agency should be created and equipped to combat IP infringement and in cases of infringement adequate penalties and compensation should be awarded.

• Examples Of Some SMEs With IP Benefits In Nigeria
  • 1. An automotive technology centre based in Lagos. They provide all the skills, materials, and resources to restore vehicles to manufacturers’ standards as if they were new. Also advising clients on appropriate products and auto care services to increase customer satisfaction and ensuring the smooth running of enterprises through strategic business management techniques. That means expert technical competence, smart structured processes, leading-edge technology, and outstanding customer service. Registering their product under Class 9 of the Nice Classification: Computer and Software Products and Electrical and Scientific Products. A trademark right protects the product and service offered by a company from infringement or damage of reputation by another company. With a trademark, you have legal recourse to sue another company that uses your likeness to further their own business ventures. This includes both registered and unregistered trademarks.
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  • 2. A company producing children storybooks, which has empowered children to discover their interests and develop the skills they need to pursue them. This is a considerable investment in the early childhood experience of a child. Registering their product under Class 41 of the Nice Classification: Education and Entertainment Services. A trademark right protects the product and service offered by a company from infringement or damage of reputation by another company. With a trademark, you have legal recourse to sue another company that uses your likeness to further their own business ventures. This includes both registered and unregistered trademarks.
     
  • ​3. An Agro-Export, Agro Processing and Mining Company situated in the heart of Kano State manned with professionals, which engages in the exportation and processing of agricultural products as well as the mining of mineral resources. Operating in agro-processing, manufacturing, and mining, the group has been active for more than 10 years. As a leading supplier of agricultural products, its objective is to increase presence in the global markets. Registering their product under the Class 3 and 30 of the Nice Classification:  Cosmetics and Cleaning Product / Staple Food Products. A trademark right protects the product and service offered by a company from infringement or damage of reputation by another company. With a trademark, you have legal recourse to sue another company that uses your likeness to further their own business ventures. This includes both registered and unregistered trademarks.
     

IP rights can be used to protect and create value for businesses, yet many SMEs in Nigeria are unaware of its value, therefore, eliminating the chance to improve and grow their businesses through the effective use of the IP system. Studies show that when businesses are IP savvy and acquire IP rights they are more equipped to grow in the increasingly knowledge-driven economy.