Repositioning MSMEs for economic growth

In recent days, there have been fast paced and powerful conversations around rejuvenating Nigeria’s comatose MSME sector ostensibly through the injection of funds to the sector but equally important, making these funds easily accessible to operators of MSMEs in the country. Assistant Editor, Nduka Chiejina reports on what is afoot for Nigerian MSMEs

With unemployment at 23%, insecurity growing by the day from all corners of the country, the only way to check these challenges is to engage the masses in productive activities that takes away the stigma of joblessness and engenders an atmosphere of positive self worth in a large number of Nigerians.

The key is to encourage the growth of micro small and medium enterprises (MSMEs) and having recognised this, the government and relevant agencies are now scrambling to support the growth of this very vital sector to launch the economy to strength, get angry youths off the streets and put food on family tables.

Government’s move

The Office of the Vice President has initiated an MSME Clinics to nurture MSMEs where entrepreneurs with ideas meet potential support agencies.

The MSME Clinics were introduced by the federal government to bring together key frontline government agencies and stakeholders to interact together with a view to removing impending bottlenecks. The Clinic provides an enabling environment for all critical stakeholders to interact with each other to enable federal government agencies to proffer on the spot solutions where possible, to problems affecting MSMEs.

The MSME Clinics is a collaboration with the Federal Ministry of Industry, Trade and Investment, State Governments, and key federal agencies such as; BOA, BOI, CAC, DBN, FIRS, ITF, NAFDAC, NITDA, NEXIM, NEPC, RMRDC, SMEDAN, SON.

The Clinics provide critical support to MSMEs in the areas of: Access to Finance; Business Registrations; Product Registration and Certification; Information Dissemination; Skills Acquisition/Capacity Building; Access to Market and Tax Compliance.

The need to encourage the growth of MSMEs has become more pressing in view of the fact that limited white collar government job offers which sparingly appears in Ministries, Department and Agencies are scooped up by the powerful.

The private sector naturally is now considered the best alternative for job creation to help reduce unemployment, keep the youths busy and positively engaged so they can take their minds of crime, banditry and terrorism.

Over the years, MSMEs barely survived beyond their third years of establishment because they are constrained by the crippling factors such as absence of stable power supply, frightening levels of insecurity and near unrestricted importation of foreign items into the country.

To motivate Nigerians to pursue entrepreneurial ventures, and give fillip to the MSME Clinic, the federal government has initiated an annual award for MSMEs that are innovative and can contribute to industrial growth, employment generation and economic progress.

Coordinator of the Screening Committee for the MSMEs awards, Mr Monday Ewans, said the implementation of the initiative had assisted the government to create the environment for businesses to thrive.

Ewan, who is the Director, Enterprise Development and Promotion, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), said the government in recognition of the roles played by MSMEs has decided to come up with an award to support the sector.

The target of the award he said is “to celebrate excellence in various sectors of the economy such as manufacturing, agriculture, furniture and woodwork, technology innovation and fashion, among others.”

He said, “The aim of the MSME clinic is to create an enabling environment for small businesses to prosper towards creating jobs, creating wealth and eradicating poverty in this country. The MSME clinic has gone to 23 states and a lot of impacts have been made and one of the fallout of the clinic is the award.”

He said going forward the government would intensify its intervention in small businesses through access to finance.

What the bank says

Another player determined to change the fortunes of MSMEs in Nigeria for the better is the Development Bank of Nigeria (DBN). It organised its first lecture series in Abuja with emphasis on MSME development.

The former African Development Bank (AfDB) President Dr Donald Kaberuka while delivering the keynote address described MSMEs as the drivers of inclusive growth everywhere; this is where jobs will be created.”

He lamented that “in many African countries it is the large multinational, influential companies who are given all the facilitation, which often they do not need rather than to the MSMEs who are the job creators.”

Kaberuka noted however that “in many ways Nigeria is showing a lot of dynamism in this area; from agribusiness, retail and consumer, hospitality, entertainment, small startups in the digital space.”

One of the challenges MSMEs face in Nigeria, he said, is that many startups die within three-five years because finance – the so-called missing middle, is a big issue.

According to Kaberuka, “that is only one of the many challenges, sometimes not even the most important one. Think of a small car repair vehicle in Kaduna, or a small kiosk owner in Soweto. If electricity is unreliable his small margins are gone even if they had access to finance.”

Red tapism, multiple level taxation or inability to access government procurement or not being paid on time, inexperienced management and capacity, limited access to accounting services are the major challenges crippling MSMEs.

Support to SMEs therefore he said “must begin with a good understanding of the country in which they operate. Solutions will have to be country specific. The toolbox in the world of finance get more specialised to address the finance “missing middle.”

Managing Director of DBN, Tony Okpanachi at the lecture said the DBN is conversant with its mandate, and is on course to fulfilling it. He noted that statistics across the continent, has shown MSMEs to be “the bedrock of economic growth and development because of the critical role they play in accelerating economic transformation and industrialisation.”

In Nigeria, he said there are about 41.5million MSMEs and collectively they contribute to well over 50% of Nigeria’s GDP. “However, access to finance is still a concern for this critical segment of the economy. The latest figure indicates that at the Micro level, about 90.5% do not have access to credit whilst the figure for SMEs is put at 67.9%. Other pressing areas which rank high for SMEs are assistance in power and water supply – 83.5% as well as tax rate reduction – 73.1%”

To address this challenge of access to finance by MSMEs, Chairman of the DBN, Dr. Shehu Yahaya said the process of recapitalising the bank is in top gear to be completed in two years time and hinted that government’s stake in the bank will be diluted to give the bank greater private sector philosophy while retaining the social contract mandate of the government.

According to Dr. Yahaya, “the plan is to attract additional equity from impact investors, as well as multi-lateral development institutions. That is the way we intend to go to expand, although the government will remain a shareholder, but the relative ownership of the government will be substantially diluted in favour of private and multi-lateral development institutions.”

The private sector intervention

Support for MSMEs is also coming from the private sector through the Tony Elumelu Foundation (TEF) which has taken to mentoring young Africans in entrepreneurship. Between 2015 to date, TEF has committed $100 million to identify, train, mentor and fund 10,000 African entrepreneurs.

To scale up its intervention, the Foundation recently organised the fifth editions of TEF in Abuja. Speaking at the event, Vice-President, Prof. Yemi Osinbajo said time had come for proper funding of entrepreneurs noting that the need to increase the funding support for entrepreneurs was borne out of the conviction that it would help create jobs, reduce poverty and boost economic development.

The Vice-President described Elumelu’s Entrepreneurship Programme as a huge success, because the programme is coming at a time “when the continent is being defined by unsavoury and unwholesome stories which do not often accurately represent the reality of life and opportunity but the beneficiaries of the initiative are changing the narrative.”

Once again, funding was identified as a major problem of most medium, small micro enterprises (MSMEs) have to grapple with. To address this, some experts led by the current AfDB President Dr. Akinwunmi Adesina and Vice President Yomi Osinbajo canvassed for the creation of a Youth Entrepreneurship Investment Bank (YEIB). It will be a special dedicated bank solely set up for the funding of enterprises managed by youths

Prof. Osinbajo advocated for the setting up of a special bank for MSMEs arguing that “we must fund young entrepreneurs and provide opportunities for capacity building. Our school curriculums must emphasise not just STEM but critical thinking and entrepreneurship and the promise of entrepreneurship banks must be kept.”

On his part, Chairman of TEF, Tony Elumelu his Foundation is committed to helping the youth, by giving them seed capital to nurture their ideas. According to him, “I’m happy of this convergence. The 21 century development of Africa lies on our hands. We promised our young ones development. The sky is now yours to actualise your dream and opportunities. In TEF, we give you little seed capital to mature your ideas. I’m happy everyone is on board.”

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