88,120 MSMEs to benefit from Cash Grant- SMEDAN boss

• Says 176,240 jobs will be created through scheme
• Decries non-registration of 95% of MSMEs in Nigeria

The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) has disclosed that it has perfected plans to empower about 88,120 Micro, Small and Medium Enterprises (MSMEs) in the country by 2019 through a Conditional Cash Grant Scheme (CGS).

Director General of the agency, Dr. Dikko Umaru Radda, disclosed this development during an exclusive interview with The Daily Times editorial team in Abuja.

Radda also stated that SMEDAN will further assist MSMEs with business formalisation by assisting them to register with the Corporate Affairs Commission (CAC), opening of bank account, provision of a micro insurance scheme to cover the risks associated with their business, entrepreneurial training and enlightenment on proper book keeping procedures.

The SMEDAN boss also pointed out that about 95 percent of MSMEs in the country are not formalised and most of the entrepreneurs do not have the skills needed to grow an enterprise to profit, with many MSMEs going into extinction few years after take-off. He added that the CGS programme was meant to correct the anomalies and enable MSMEs make meaningful contribution to the Gross Domestic Product (GDP).

He said: “The idea of establishing that programme is to enable us formalise largely the informal sector because of all the MSMEs in the country, more than 95% of them are not formal, because 99% represent micro enterprises and out of this micro enterprises, 95% of them are not registered, they are not formal”.

The Director General said that he will not be deterred by the lean budgetary provisions for the Agency made worse by the present economic hardship in the country but is optimistic that the N2.5 billion approved for the Agency in the 2017 budget will go a long was to ensure the implementation of the CGS pilot programme.

He emphasised that MSMEs is the hub that drives the economy of any nation, pointing out the developed economies thrive on MSMEs and Nigeria cannot be different.

He said: “Countries that have proper statistics like United States, about 65 percent of the economy is run by the MSMEs; Canada is about 71 percent. In all other countries, it is at the range of 50 to 80 percent of the economy that is run by the MSMEs.

“I was asking a colleague of mine in South Korea when I went for a training, I said can you give me the number of MSMEs in South Korea that were not registered, and he said that they don’t have any MSMEs in South Korea that is not registered.

“In Nigeria, we are talking of about 95 percent not registered. In a survey conducted in 2013, there are about 37 million MSMEs, which employs about 59 million Nigerians and contribute 84 percent to the total work force of the country.

“MSMEs in Nigeria contribute 48.47 percent to nominal GDP, it contributes 7.2 percent to export but when you compare it to other countries, they contribute about 30 to 60 of export but in Nigeria, it contributes 7.2 percent to export, because we are mostly informal”.

On the funding of MSMEs, Radda, corrected the impression that SMEDAN gives out loans, saying that SMEDAN is not a fund disbursing Agency but only has the mandate to assist the MSMEs grow into a profitable enterprise. He added that Nigeria established a Development Bank which is supposed to make funds available to MSMEs with the assistance of other Agencies like Bank of Industry.

“Let us very clear say this, SMEDAN doesn’t give out loan; that is the wrong perception the public have on the Agency. We never give loans or grants, but we have initiated a programme that we call Conditional Cash Grant Scheme (CGS)”.

Throwing more light on how the CGS will benefit the entrepreneurs, he said: “The idea of the introduction of this Conditional Cash Grant Scheme is to formalise the informal sector because the major mandate of this organisation is to facilitate the growth of Small and Medium Enterprises, from one level to another. If you did not formalise the entrepreneurs, there is no way that you can grow them.

“This formalisation includes registering with the CAC, opening bank account, having micro insurance scheme to cover a little risk associated with the business, giving them proper entrepreneurial training on how to manage and keep books on their businesses.

“You cannot just tell the entrepreneurs come let me formalise you. The only way we do that is to introduce this Conditional Cash Grant Scheme, put certain conditions, give them some grants and incentives to improve on their business, to formalise their business and also generate more employment, because the idea is for each to employ at least one person into his business. So we are achieving formalisation but at the same time creating jobs and escalating the production of micro businesses,” he added.

The SMEDAN DG said that although the 2017 budget appropriation of N2.5 billion fell short of the proposed N37 billion, the Agency will ensure that the fund is judiciously utilised.

“In fact, when we introduced the scheme, we budgeted about N37 billion but up till today we have not received any grant, any amount of money for the conditional grant scheme. But lately, this year, we were able to have N2.5 billion courtesy of the Committee of the Senate on Industry. At the initial programme, our target was 550 participants in each local government but this time around, we will reduce the scope in a pilot study to see how viable the programme could be and maybe we escalate it and take it to the whole nation.

“As at today, they have appropriated N2.5 million. If the budget is funded, we shall start the pilot programme of the CGS. We have selected one state in the six geographical zones of the country, and in each state we are piloting 100 entrepreneurs in each local government.

“So the target for this pilot project is 14,600 entrepreneurs across the six states of the federation. We have since advertised for the jobs and if the money is released, we shall start the programme very soon”.

Radda also disclosed that the Agency has put in place some measures to ensure that funds were not diverted to other uses and also strengthen the disbursement process to ensure that only eligible MSMEs benefit from the scheme.

“The first criteria is that you must be a micro entrepreneur and micro enterprise is an enterprise that employs one to less than nine persons and which has a capital base of N1 to less than N10 million excluding land and building. This is micro business and this is our target.

“Secondly, you must be an existing business and your business must be in that local government area and it has to be verified. These are some of the conditions because we want to ensure equitable distribution of resources across the local government. Even at the local government level, if the local government has 10 wards, we will make sure that each ward produce 10 micro entrepreneurs.

“The attraction to this in terms of monitoring and evaluation is that we will shoulder the responsibility of registering them with the CAC. It is SMEDAN that will ensure that account is opened for them at those states. We would provide entrepreneurship training to them, we are the people that will cover micro entrepreneurship insurance on their businesses and it is when we meet all these requirements that we now channel the money in their bank accounts and we will urge each entrepreneur to employ at least one person.

“We will monitor them because there is provision for monitoring. After monitoring them for four to six months, we will choose the best 10 percent in terms of their performance and turn-over in their banks accounts and then we will give them a loan of N200,000, this time not grant. Loan but interest free, it is all incorporated in this programme.

“The essence of doing that is to motivate them and stir competition among them and everybody would like to grow his business to that level and then enjoy that 10 percent. And from there on, SMEDAN will step aside, and allow them to continue because we have already created that kind of thing in them. The whole idea is for them to be familiar and be conversant with the banking processes and how they can match their products to the existing market”.

Radda also stated that entrepreneurs will in a town hall meeting, be exposed to the relevant taxes required of their business to ensure that they do not fall prey to the antics of tax authorities at the local government councils who take advantage of their ignorance to milk them dry. Such measures, he reiterated, is to ensure the sustenance of business beyond the incubation stage as most of those taxes levied on them are illegal and do not
enter government coffers.

The Director General was hopeful that in the nearest future, MSMEs in Nigeria will become a major revenue earner for the nation and also compete favourably in the international market.