THE ECONOMIC IMPACTS AND PROSPECTS OF CAMA LAW 2020 ON SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA
1.1 Background of the Study
Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits. The abbreviation “SME” is used by international organizations such as the World Bank, the European Union, the United Nations and the World Trade Organization (WTO). SMEs have proven to enhance the economic growth of any country. They are being regulated and managed by a recognized government body known as the Corporate Affairs Commission (CAC).
The Corporate Affairs Commission (CAC) of Nigeria was established in 1990 vide Companies and Allied Matters Act no 1 (CAMA) 1990 as amended, now on Act cap C20 Laws of federation of Nigeria. It is an autonomous body charged with the responsibility to regulate the formation and management of companies in Nigeria. It carry out its functions through accredited members of Association of National Accountants of Nigeria, Institute of Chartered Accountants of Nigeria, Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) and the Nigerian Bar Association (NBA). It is headed by a Registrar-General. Prior to the enactment of CAMA, these activities were carried on under the Companies Act 1968. (CA 1948).
The role small and medium enterprises play in the development of country is very important. SMEs have greatly contributed to the Nigerian development in terms of employment, growth and development, and marketing of goods and services (Ayozie O, 2006). The Nigerian Government is turning to small and medium scale industries and entrepreneurs as a means of developing the economy and solving problems (Latinwo and Ayozie, 2010). A great percentage of all registered companies in Nigeria are constituted by small scale industries and they have been in existence for a long time (Ayozie, 2006).
Irrespective of the good work done by SMEs in Nigeria, there are several factors that militate against their effective and smooth functioning which government policies, cost of setting up and registering the business under CAC are most of its challenges.
Following the new CAMA Law 2020 assented by President Muhammadu Buhari on August 7th 2020, there has been unease and uproar over the Company and Allied Matters Act. The CAMA 2020 which has received commendations from the business community, as it is said to facilitate the ease of doing business in the country.
It is no longer news that the repealed Act was overdue for a change after 3 decades of provisions which became obsolete due to the dynamic nature of doing business globally. The new Act is expected to bring succour to businesses and promote ease of doing business.
Some business friendly provisions in the new law include; “Single member and shareholder companies –S.18(2) of the new CAMA now makes it possible to establish a private company with only one (1) member or shareholder.”
“Exemption from appointing Auditors – Small companies or any company having a single shareholder are no longer mandated to appoint auditors at the annual general meeting to audit the financial records of the company. S.402 of the new CAMA provides for the exemption in relation to the audit of accounts in respect of a financial year.”
“Exemption from the appointment of company secretary – The appointment of a Company Secretary is now optional for private companies. According to S. 330 (1) of the new CAMA, the appointment of a company secretary is only mandatory for public companies.”
“Creation of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) – The new CAMA introduces the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). This combines the organisational flexibility and tax status of a partnership with the limited liability of members of a company.”
“Reduction of Filing Fees for Registration of Charges – Under S. 223 (12) of the new Act, the total fees payable to the CAC for filing has been reduced to 0.35% of the value of the charge. This is expected to lead to up to 65% reduction in the associated cost payable under the regime.”
CAMA 2020 mostly manifests the objective of the Nigerian government to simplify business operations and ensure overall progression in the Nigerian business environment. The friendly provisions towards small businesses will encourage more commercial activities which will attract potential investors and develop the economy. It is expected that the new Act will usher in a new business regime for overall economic development in line with international best practices.
1.2 Statement of the Problem
The uneasy regulations, costs of setting up and management of SMEs in the country affects the proper running of businesses in Nigeria. These government regulations tailored by CAC hampers on the production and growth of SMEs in the country.
Following concerns on the CAMA 1990 becoming outdated, Buhari in November 2019, wrote to the Senate seeking an amendment for the Act to be repealed or re-enacted. The amendments were aimed at encouraging investments that will allow small businesses and startups thrive, lower costs and ease regulatory burdens. It also provides significant benefits to companies by reducing red tape and making it easier to comply with regulatory obligations. It is based on this premise that this study seeks to examine economic impacts and prospects of the CAMA Law 2020 on Small and Medium Scale Enterprises in Nigeria.
1.3 Objective of the Study
The primary objective of this study is to examine the economic impact and prospects of the CAMA Law 2020 on SMEs in Nigeria. Other objectives of this study include:
- Assessing how the performance of SMEs is impacted upon by the CAMA Law 2020.
- Assessing the benefit of the CAMA Law 2020 on the economy of Nigeria.
- Identifying the future prospects of the CAMA Law 2020 on the economic growth of Nigeria.
1.4 Research Questions
The following research questions guides the study:
- How has CAMA Law 2020 impacted the performance of SMEs?
- What are the benefits of the CAMA Law 2020 on the economy of Nigeria?
- What are the possible prospects of the CAMA Law 2020 on the economy of Nigeria?
1.5 Research hypothesis
The study developed for testing the following null hypothesis:
H01: There is no significant positive relationship between CAMA Law 2020 and the performance of SMEs in Nigeria.
H02: There is no significant positive relationship between the CAMA Law 2020 and the economic growth of Nigeria
1.6 Significance of the study
An understanding of the role SMEs place in the economic growth of any country, and the essence of the CAMA Law 2020 enabling an environment where they thrive well would be of great relevance to government policymakers, students, researchers, students’ affairs practitioners and all the various bodies that comes to play when talking of CAMA Law 2020 and SMEs in the country. The outcome of the study will help business owners and companies as well government to strategize and reconstruct their policies in a way to attain the CAMA Law 2020 effectively. It will also push
people further to identify the exciting opportunities the CAMA Law 2020 will bring into the business environment.
1.7 Scope of the study
The study is focused on assessing the economic impacts and prospects of the CAMA Law 2020 on SMEs in Nigeria. The various ways the signed CAMA Law 2020 will enhance the performance of SMEs will be examined in this study.
1.8 Definition of terms
CAMA 2020: In this study, this term refers to Company and Allied Matters Act 2020
SMEs: Small and medium-sized enterprises (SMEs)
Impact: to have an immediate and strong effect on something or somebody.
Prospects: This refers to something that is expected or certain to happen in the future.