How we ‘re positioning SMEDAN to develop economy – Dr. Radda

Small and Medium Enterprises Development Agency of Nigeria is an agency saddled with the development of MSMEs in the country. In this interview with TONY AMOKEODO, MYKE UZENDU, MATHEW DADIYA and FRANCESCA IWAMBE, the Director General of SMEDAN, Dr. Umar Dikko Radda, explains how he will grow one product in each local government and position MSMEs to the international market. Excerpts

What has been your experience so far in piloting the activities of this agency?

The government came at a time when the country was witnessing an economic hardship. When I came to the Agency as the Director General, I realized that the budgetary provisions for the agency was very lean compared to the huge mandate given to the organisation. We are talking about the diversification of the economy, we are talking about how to move the economy of this country to greater height. When I came to the agency, we met a lot of programme, a lot of initiatives on the mandate that established the agency.

We looked at those programmes; and we saw those that had prospects; and that we need to escalate them. We saw some that needed to be set aside so that we can face the few ones for the benefit of the country; and also for what our resources can accommodate. This is what we have been doing; and we have been getting results.

How far has the Agency gone in giving out loans to entrepreneurs?

Let us be very clear at this, SMEDAN dosen’t give out loan, that is the wrong perception the public has on the agency; but we have initiated a programme we call Conditional Grant Scheme (CGS). The idea of establishing that programme is to enable us to formalize largely the informal sector, because of all the SMEs in the country, more than 95% of them are not formal, because 99% represents micro enterprises; and out of this micro enterprises, 95% of them are not registered, they are not formal.

The idea of the introduction of this Conditional Grant Scheme, is to formalize 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 formalize the entrepreneurs, there is no way that you can grow them. This formalization include registering with the Corporate Affairs Commission, opening bank account, having micro insurance scheme to cover the 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 formalize you, the only way we do that is to introduce this Conditional Grant Scheme, put certain conditions, give them some grants and incentives, to improve on their business, to formalize 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 formalization but at the same time creating jobs and escalating the production of micro businesses.

How much have you budgeted or expended on this programme?

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 N2.5bn 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 may be 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.

How do you follow up to ensure that the money is utilized for this purpose?

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

Second, 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 it is we that 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 account 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.

There was a study that micro- businesses crash in Nigeria after five years due to taxation and infrastructure deficit. Are you going to make provisions for tax incentives to allow the business grow.

I don’t believe that the major challenge why MSMEs die after some time, is because of taxation. It is largely because of our attitude, lack of managerial skills to carry on with their business activities. People have the opinion that their primary challenges when it comes to SMEs is lack of funding.

There are so many people who are in business who came with their capital and their business is dead simply because they don’t know how to manage the business. You only saw somebody on the street selling garri; and you just felt that may be, he is making money, so, let me go into selling garri.
No study is conducted, you didn’t even ask or know any skill that is required in the business space to be able to do your businesses. But, some people feel that since these people are doing this, let me just go into it because they are making money but they don’t even know how that person is surviving. So, you will go with your money and come out with nothing.

Taxation is a fundamental issue; and the government is addressing that aspect. In fact, I must thank the Chairman of FIRS now, Mr. Babatunde Fowler, because he has given so many incentives to MSMEs. He has given them a tax waiver on those that have backlog of taxes that they have not paid. He gave them a kind of waiver, let them come and start afresh, all those things will be wiped out. It has been done through this association of NASME. Any MSME that has its registration will be able to enjoy that.

But let me just tell you, these people that are requesting for waiver from FIRS, largely are small and medium businesses. Micro businesses are not even formalized. So, they are not even in the radar of the taxation agencies. It is only at the local government level that I believe, some of these local government collect some taxes, which are not even stipulated by the law. They are just taking something that is not put into government coffers.

Some of these local government employees will print receipt and start collecting fake taxes from these people. It is because the people don’t have the knowledge. If they have been given proper entrepreneurship training and ability to interact with these regulatory agencies, they will be in the knowledge as to what should be collected from them and what should not have been collected from them.

In fact, that was why I had wanted to undertake a visit, I have written to the Chairman of FIRS that in collaboration with us, we should undertake a town hall meeting at the local market, and tell them what they should do, the kinds of incentives available for them, what they need to do, what they should not give out; in fact, give them the proper advocacy and sensitize them on certain things they need to do to improve on their businesses and also check mate the cartels that have been collecting money from them at all levels.

What of the infrastructure challenge?

Infrastructure challenge is true because, largely most of these micro and small businesses require power to operate. If you go to most of our market, you will see one small generator and even the environmental pollution is not healthy. The power challenge in Nigeria is a very major challenge. I believe that with the current thing that is happening, and to tell you that we are in partnership with African Development Bank (AfDB).

A study is now being conducted, which is being sponsored by AfDB to study the viability of our IDCs. We have 23 IDCs located across the federation to enable us to turn around those IDCs into enterprise clusters. You can bring mono clusters in a place, you bring infrastructure, buildings, water, electricity in a common place so that they can all operate and ease off the hardship affecting most of the entrepreneurs in terms of infrastructure. It is also easier for regulatory authorities, including the banks, National Agency for Food Drug Administration and Control(NAFDAC), Standard Organisation of Nigeria(SON), to meet those enterprises in a cluster to provide all the services; and it is easier for banking institutions to provide monetary assistance to the enterprises when they are in a cluster. It makes it also easier to access market because all the people who needed those products will come and buy the products in bulk.

If you look at the power plan for the country, last month, we were at the banquet hall where the power plan for the federation was presented to us at the Presidential quarterly business meeting. It was really a very good thing for the administration. If they are able to get it right, then, Nigeria will soon overcome the power challenge.

What efforts are you making to revive the One Local government One Product programme (OLOP).

OLOP programme has been in existence in this agency since 2014; but nothing much has been achieved. A study has been conducted across the country in which one product is identified in each local government of the federation which has competitive and comparative advantage within that location. The idea is to see how we can improve on that product in that local government to a very high level even to the level of export. Major challenge is budgetary provision; but last year, we were able to get some little money on this OLOP programme. So, we chose five centers that we shall use as a pilot study, located across the federation.

We have one center in Kaduna, which is a Kilishi processing center, we have identified one in Kaduna, honey production center, we have identified one in Abuja, which is cassava processing center; we identified one in Osun, which is sweet potatoes processing center; and we identified one in Anambra, which is palm kernel production center.

We undertook a sensitization visit, in which we identified the cooperatives that existed; and largely, our target is existing organic cluster. We now get a working space for them, which SMEDAN will pay for, we now give them a common machine that all of them in that cooperative can use to produce. Then, we also give them a working capital for raw material to escalate production.

The whole idea is to address the issue of work space, address the issue of working capital, address the issue of common machinery and lastly to link them up with up takers, whether supermarkets, whether people who needs those products, so that ones they produce, they have people who are ready to take their produce.

So we are doing it at this moment in these five centers and in our 2017 budget, we provided for one center in each senatorial district, that is 109 centers, and in 2018, we want to target one center in each federal constituency. By 2019 we shall target one center in all the remaining local governments that were not covered. So that at least we shall have one center which will serve as a model for the other entrepreneurs to see.

Once they understand how the working of our clusters operate, then other people who were not into this programme will go and form a cooperative, try to get money, do something like that, escalate their businesses instead of working individually. It is even easier within this concept for the BOI and BOA to collaborate and obtain loans themselves under our guidance and they can continue to have their business.

From there OLOP will move and take the economy to another height. I must say that I am very proud of the OLOP programme, because we have started to see the impact this initiative is making in the economy of this country.

Sometimes, people fail to understand; and you don’t have to do everything for anybody. What you need to do is create something that would serve as a model for others to continue from there.

What is your collaborative efforts with the development partners and how will the Development Banks of Nigeria affect MSMEs in Nigeria?

We must thank the government of Muhammadu Buhari for initiating the Development Bank of Nigeria. The bank was to provide loans to only MSMEs in the country. It is a whole sale bank, it is not going to be like any commercial bank. They will be giving out the money to commercial and micro-finance banks at their own terms.

The challenges MSMEs are about obtaining facilities from banks; and it is because they cannot meet up with the requirements needed. You must have C of O of your house even when your capital is not more than N50,000 or N20,000; and people are asking you to provide C of O.

Two initiatives are on the ground. There is a collateral registry being championed by the Central Bank of Nigeria, for people to be able to use movable assets to obtain loans from banks.

As at today, SMEDAN in collaboration with Bank of Industry and NEXIM bank, have gone to India and Dubai to study the rating agencies of those countries. We have solicited for the support of Dawn and Broad street to help us developed SME Rating Agency of Nigeria (SMERA). Efforts have gone far; and I believe that we shall fix a date on the 12th of September to sign the MoU between SMEDAN, Bank of Industry and NEXIM bank together with Dawn and Broad Street so that we can begin the process of setting up this SMERAN.

The essence of the rating Agency is to rate our SMEs. Once they rate our SMEs, with that rating, they can easily go to any financial institution and get loans easily and simply.

Is your agency forming a synergy with other sister Agencies with similar mandate to avoid duplication of efforts and funds?

No. To me, some Agencies should not exist.

Why?

Because there are so many agencies that have similar or the same mandate and that is the major challenge we are facing. When I came into government, the major challenge I witnessed is that there is no synergy among agencies of government. We see ourselves as competitors rather than collaborators.
The whole essence is to develops Nigeria, that is the essence of our appointment. But some people are guarding closely, they don’t want people to know what they are doing, may be there are certain things that they are doing that they don’t want people to know.

What is the essence of having duplication of efforts? What is the essence of government spending so much money here or there, doing the same thing?

I think there is need for government to revisit the Orasanya Committee report, because they have done a very good job. They have even streamlined those ones that should be merged together, those ones that should go. It will even reduce the cost of running government because it will reduce the overhead cost of the country drastically.

This collaboration is very important and very serious. SMEDAN is an agency of government which is in charge of small and medium enterprises and a bank was established to cater for MSMEs without the involvement of SMEDAN. I think it is important that government should get together all relevant agencies that does this kind of things.

But slowly, I think these things are going to change with the establishment of this MSME clinic which brings all the agencies together. With the inauguration of the MSME council headed by the Vice President. I think with these efforts, this synergy thing is going to improve a little and then, we will get it right.

How would you want to see MSMEs in Nigeria in the next ten years?

I want to see an MSME in the Nigeria that you can compare with any other MSME you can find any where in the world. If you see the performance of MSMEs in other countries, it is really amazing. Even in Nigeria, it is the MSMEs that move this economy forward.

For countries that has proper statistics like in the United States, I think, about 65 percent of the economy is run by the MSMEs. In Canada, it is about 70 per cent, in all other countries, about 50 – 80 pe rcent of the economy is run by the MSMEs.

For Nigeria to reach that level, that was the essence of introducing CGS because you cannot move if you are not formalized. You don’t know how to run the business, you don’t have major skills.

I was asking a colleague of mine when I went to South Korea on the number of MSMEs in South Korea that is not registered and he said that they don’t have any. In Nigeria, we are talking about 95 per cent not registered.

So, you don’t have the total number of MSMEs in Nigeria as at now?

At the census conducted in 2013, there were about 37 million MSMEs, which employed about 59 million Nigerians; and contribute 84 per cent to the total work force in the country. We are conducting the latest survey this year. It is being done after three years.

MSMEs in Nigeria contribute about 48.47 per cent to nominal GDP, it contributes 7.2 per cent to export. But, when you compare it to other countries, they contribute about 30-60 per cent to export, while in Nigeria, it contributes only 7.2 per cent, because they are mostly informal.