MONDAYBUSINESS ‘Why there is high mortality rate of MSMEs in Nigeria’
Dr Dikko Umaru Radda is the Director General of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). In this interview, he spoke about how the agency intends to create 1.5 million jobs yearly, establish Entrepreneurship Incubation Cent
When will the programme be implemented?
When we came up with the idea, we wrote a letter to the Minister of Industry, Trade and Investment and that letter has since been forwarded to the Presidency. Up till now, we have not received any correspondence as regards to that. But we are making a move. We want to start a pilot project, may be 50 to 100 entrepreneurs. We are pushing for this in the 2017 budget. We are thinking of picking 50 people in the six geopolitical zones and do a pilot study and if the government sees the need and the usefulness of the programme, maybe they will key into it.
What is the agency doing to create Entrepreneurship Incubation Centres for SMEs?
Last month, we went to India and Dubai on a different mission and this thing came up. We went for the Small and Medium Enterprises Rating Agency of Nigeria initiative we want to set up. We want to create that in conjunction with Bank of Industry, NEXIM. We went to understudy how their rating agency works and get valuable information about it. As a result of this, we visited the Small Industries Commission in India and visited some incubation centres they have. In those incubation centres, what you see is different trades and there are so many machines available with which you can train entrepreneurs on the spot on how to produce some goods and services.
We saw them and they produced some of those things in our presence, like toilet paper, a place they do tailoring and embroidery and so on. The interesting thing is that some of the machines are fabricated by their local manufacturers. When we came back, we had discussion with BOI and the Ministry of Industry, Trade and Investment is also involved. We thought we should establish these incubation centres even if there are three. BOI is going to come in; SMEDAN is going to provide the IDCs to serve as incubation hubs for the entrepreneurs. We are still talking with the BOI but we are planning that before the end of 2017, we will have three solid entrepreneurship centres, which can match any incubation centre in the world. We are just rounding up with the BOI and they are financing the incubation centres. Our contribution is that SMEDAN is providing the IDCs and the will rehabilitate, provide the machines, and then SMEDAN will run it.
In fact , last month, our staff and BOI staff were in South Africa to study some of the incubation centres there.
How is the Agency helping to facilitate finance for SMEs?
You know that is one of the challenges MSMEs have in Nigeria. In the mandate of our agency, we are to facilitate access to finance. Any entrepreneur who works into SMEDAN, with a bankable business proposal we will guide in the way to access finance with these Development banks. i.e the Bank of Industry(BOI), Bank of Agric (BOA) and even with some commercial banks whom we have signed MOU with and even some microfinance banks. We can introduce the client if he or she has good business proposal. The is the reason we want to start this rating agency of Nigeria , so that any MSME that has any rating from the agency, it will be easier for them to access finance because , he or she must have met all the requirements. And recently, we have established a credit information portal in collaboration with DFID. What the portal provides is all the information about credit facility available with the banks. Whether, commercial, development banks, microfinance banks. If any entrepreneur goes to the website, he /she will be able to see the credits available at that time and by which financial institution. And they will see the guideline that they need to fulfil.
The government of President Muhammadu Buhari is trying to solve the problem of financing for SMEs in totality by the creation of Development Bank of Nigeria (DBN). This DBN is meant for SMEs. It’s a wholesale bank, the monies will be given to commercial and microfinance banks who have applied to finance MSMEs but it will be on the dictate of the DBN, the interest rate will be determined by the DBN, and the procedures and guidelines will be by DBN. The essence of doing that is to reduce the stress MSMEs encounter when they want to access loans.
How confident are you that after the establishment of this bank, SMEs will not experience the same challenges with finance?
We hoping it will not be so with the seriousness put in by the Ministry of Finance. But I prefer a situation where there is a synergy between the agency that is in charge of MSMEs in the country (SMEDAN) and the bank. As at today, SMEDAN has no role to play with the DBN, so there is need to have that kind of synergy. Because we are the apex agency in charge of MSMEs so we should be in a position to act as a referral point to the commercial and microfinance bank. I hope the ministry of finance will see the need to let us have a role to play in the Development Bank of Nigeria.
How soon will rating agency ready? the be
The good news I want to tell you about this SMERAN is that we are signing an MOU next week with Bank of Industry, Nigeria Export Import Bank (NEXIM), SMEDAN and the company that is going to help us develop the rating agency. We will do a kind of Public Private Partnership with them and there should be a role for everyone to play. As soon as we sign the pacts, the development of the agency should commence. We will get the offices and employment of the staff.
Do you have data on SMEs base across the country?
We have. What we do here is that we started a Survey in 2007 with the collaboration of the National Bureau of Statistics (NBS) because we don’t have the resources to conduct a censors. The survey has given us figures on SMEs including how many are from each state. The MSME policy has it that we should do it every three years. We conducted in 2010, in 2013 which is the latest we have. For the 2013, we had 37.76 million MSMEs in Nigeria. Lagos has the highest of 3.9million and Niger has the lowest of 367,000.
The survey revealed that Micro enterprises have about 99 per cent of the total because they have 36,994,000. The Small has about 68,000 and the Medium has 4,670. So you can see the level which we are in Nigeria. And you can appreciate that we need the Conditional Grant Scheme (CGS) so we can formalize the micro enterprises because there is no way they can grow to the medium if they are not formalised.
What we are expected to have if they are not formalised is that they will die. We are now in the process of conducting the next survey.
What are you doing to help small grow to the medium?
The first thing we are doing is to help them become formalised. We are also helping them get access to raw materials, market and funding. Because if they have all these, they won’t go anywhere. They also can’t grow if they don’t have the basic entrepreneurial skills.
How far has the agency gone with the business development of MSMEs?
We are doing a lot in terms of capacity building. Among the people in the 18 states that Industrial Training Fund (ITF) trained recently in terms of technical and vocational, we trained 10,000. They were also given training on entrepreneurial skills and we are now working to provide another 10,000 with similar
training in the 19 other states. There have been more requests from different organisations and even state governments to give such trainings.
Do you have enough staff for that?
Most of these trainings are not coming at once. We take them serially, and because we have offices in the 36 states of the federation, we have zonal offices and staff there, if they are inadequate, we send some staff from the head office to complement them.
Do you have specific training programme for women?
Women are our dearest in SMEDAN. This is because most of the association we deal with are women because they are more proactive than men. Before we receive one association from men, we would have received more than five from women.
You spoke on business plans. Does SMEDAN help to prune plans for entrepreneurs?
This is what we do. Any entrepreneur who walks into SMEDAN saying he does not know how to do it. We have two offices dedicated for business clinic and it is meant for any entrepreneur in whatever area he is operating. We teach them how to develop business plans and we have some outlines and fliers on how to do business plans.
At SMEDAN, we don’t charge them for the cost of teaching them how to do a business plan.
What legacy do you want to leave behind?
It is for the people to decide; I cannot say that. But what I want to achieve as the chief executive of this agency is I want to see that the Act establishing this agency is amended. This is because the Act does not give the agency the power to regulate the activities of business development service providers and business development support services, and also to regulate the MSMEs space to make it a robust business environment. It is to also be able to allow the agency to generate fund outside the government budget so that it can provide the entire necessary assistant to small and medium business. The budget appropriated to the agency is not enough to do everything and mandated by the law, compared to other agencies that generate fund. We can only achieve that if we amend our Act.
As I speak, it has passed first and second reading and a public hearing. What we are waiting for now is third reading and subsequent hearing. If this is the only thing I achieve as the DG of SMEDAN, then I know I have done something for the MSMEs that may take them years to achieve.
We do regulate MSMEs but the law is not so strong as we don’t have the powers to prosecute offenders. We don’t have any licencing instrument. Like we are talking about the amendment of the Procurement Act to allow the use of Made in Nigeria to a certain percentage which are produced by the MSMEs, but how do you know them? We need to register them and with that registration, they can bid and qualify for anything as MSMEs in Nigeria. They could also use that to get funding from the banks. There are so many gaps that need to be filled.
What revitalise Nigeria? are you the 23 doing IDCs to in
We are able to secure a $1 million grant from the African Development Bank (AfDB) to do a comprehensive study of the Industrial Development Centres (IDCs), looking at the comparative advantage of the IDCs given their location. We have advertised for the jobs and have opened the bids; very soon we will award the contract for the study of the IDCs. And as assured by AfDB, after the study, we will look at the vital ones each from a geopolitical zone and see how AfDB can assist in revamping them or maybe, we will consider a Public Private Partnership (PPP). The IDCs are meant to produce skilled manpower for the industries and there is one in Abuja. Some were established since the early 80s’; others were established in the 90s’. You will cry when you see the level of decay they have been, some machines have become obsolete because since installation, they have not been used. In some of them, we have different workshops for metal works, electrical and electronics, woodwork, automobile among others.
The concept is very good but the most unfortunate thing is that they have been left there to rotten and we are trying to revive them. The IDCs are different from the Incubation Centres because they are meant to train manpower for the industries while the incubators train entrepreneurs to know how to do certain trade and establish their businesses after some time. The IDCs are vital because there is no how you can have an industrial revolution without training skilled manpower that will feed the industries.