— Sector needs N10 trillion to boost economy

JULIUS JOHN  |
Bank-of-Industry

The dwindling fortunes of Micro, Small and Medium Enterprises (MSMEs), in the country as been identified as an indication that the country has not found the right approach and strategy to tap the potential of the sector for its industrialisation.  However, experts believe that Nigeria must begin to address seriously the challenges confronting the sector to able to realise its economic and industrial potential.
With a population of over 170 million and a market extending to the region African region, the MSME provides a veritable platform for economic growth and development. This is the evidence from developed economies across the globe, but the country’s inability to deal with its teething problems has greatly undermined the growth of the sector.
The reason for this they say is due to lack of access to funds by operators in the sector. Operators believe that if the required funds are accessed, the economy will experience substantial growth much more than what obtains now. Besides, with the growth of the sector, unemployment at all levels will be reduced. The funding requirement of the MSME sector is in deficit of N9.6 trillion.
However, in recent years, the Bank of Industry (BoI), which is a specific purpose vehicle for that task, has striven to address the issue by entering into agreement with some Money Deposit Banks (MDBs) to buoy credit advancement to entrepreneurs in MSMEs.
Not too long ago, BoI signed a Memorandum of Understanding (MOU) with 10 SME-friendly banks. The banks were carefully chosen to partner with BoI in the financing of its SME customers. The banks are Access Bank, Diamond Bank, Ecobank, Fidelity Bank, First Bank, First City Monument Bank, Skye Bank, Stanbic IBTC Bank, Standard Chartered Bank, and United Bank for Africa.
“The BoI recently revealed to Business Hallmark through its spokesperson, Mrs Hadiza that it is also exploring other alternative modes of funding for the sector.
“The Industry Bank as I speak to you is considering alternative modes of funding such as continuation of sector-specific intervention funds by the Central Bank of Nigeria (CBN), Ministry of Agriculture, Solid Minerals and others; managed funds from various state governments and foundations; long-term loans at very low interest rates from multi-lateral/international development institution,” she said.
Under the arrangement, BoI and the banks will collaborate in the provision of long-term loans to qualified SMEs based on BoI’s Risk Acceptance Criteria (RAC) and the provision of working capital to the SMEs by the banks also based on their individual RAC. BoI Managing Director Mr..Rasheed Olaoluwa said: “The synergy that has evolved between BoI and the SME-friendly banks is unprecedented. It will undoubtedly foster greater access to finance for SMEs, financial inclusion for Nigerians and engender wealth and accelerated job creation for Nigerians.
“Nigerian businesses cannot be built on debt alone. It has long been part of the bank’s vision to find ways to provide needed equity capital and business advice to promising Nigerian businesses”
“It is also our expectation that the SMEs that will benefit from this partnership will be good corporate citizens and meet their financial obligations to the partnering banks. This will stand them in good stead for consideration for larger loan amounts with the hope that they will in the near future metamorphose into large enterprises.”
However, ins pite of the huge steps taken by the BoI in providing funds to improve the lot of MSMEs in Nigeria, certain factors such as lack of data, absence of business plan and corporate governance are denying operators of the MSMEs access to finance.
When the BoI helmsman assumed office in May 2014, he made it very clear that his mission is to turn things around at Nigeria’s foremost development finance institution. On assumption of office on May 19, last year, he resolved to use the bank as a vehicle to drive Nigeria’s industrialisation by focusing on the MSMEs sector. This is because of his belief that the sector is the engine of economic growth on account of its potential to create jobs, boost production and reduces poverty.
To unleash the industrialisation drive, the bank under Olaoluwa’s watch, unveiled a number of innovative financing options, technologies and products to position the MSME sector to play its catalyst’s role in industrialisation. Some of them include Seed and Angel funding, Value chain finance, venture capital and crowd funding, among others.
Many experts are of the opinion that the future of Nigeria lies more on the leveraging of MSME’s. The sector, according to experts, is strategically positioned to provide up to 80 per cent of jobs, improve per capita income, increase value addition to raw materials supply, improve export earnings and step up capacity utilisation in key industries. This is why BoI focuses on providing innovative, dynamic and wide range of financial services to the sector.
A survey conducted by the Nigerian Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) showed that there are 17.28 million MSMEs in Nigeria employing 32.41 million people and accounting for an estimated half of Nigeria’s Gross Domestic Product (GDP). However, access to affordable finance remains one of the major challenges inhibiting the MSMEs’ growth and development.
Recently, the Central Bank of Nigeria, CBN began the disbursement of N220bn Intervention Fund for Micro And Small Businesses by Bank of Industry (BoI) and issues of corruption and unnecessary stringent conditions being experienced while trying to access Development Fund (MSMEDF), have again cropped up.
As a matter of fact, it got so bad that the Association of Micro Entrepreneurs of Nigeria (AMEN) recently called on the Economic and Financial Crimes Commission (EFCC) to urgently probe the Bank of Industry (BoI) activities regarding disbursement of the fund.
This is coming on the heels of similar displeasure and worry expressed recently by stakeholders in the nation’s real sector, who have noted with dismay, the inability of many entrepreneurs to access the N220 billion SME’s funds, a development that has pushed operators in the MSME sector, lately, to appeal to the Central Bank of Nigeria (CBN) to promptly review the guidelines for the disbursement of the intervention funds, which is aimed at assisting the operators to shore up their production capacity.
AMEN President, Prince Saviour Iche, who spoke with Business Hallmark, alleged that officials of Bank of Industry (BoI) unduly prevent SME operators from accessing the N220 billion MSMEDF made available by the Federal Government for selfish reasons. He said it was time EFCC investigated activities of the bank.
“Investigations by our members revealed that BoI gives out these loans to ‘ghost beneficiaries’ who are cronies of officials of the bank, whom this fund was not intended for in the first place”, adding “we challenge the BoI to publish the names and addresses of those it claimed had accessed the loans. “If you hear people say our members are unnecessarily being hindered from accessing the fund, it is the truth.
This is because they have come up with conditions that are unwholesomely so rigid for SME operators. This is equally because as the president of AMEN, I receive text messages daily from our members complaining of the sufferings they go through trying to access the fund. So, such strident conditions make it very cumbersome to access the fund”, he maintained.
The Bank however refuted the allegations and also dismissed as untrue insinuations that it was deliberately frustrating genuine MSME operators from accessing theN220 billion MSME Development Fund provided by the Central Bank of Nigeria (CBN). It therefore urged the agitating stakeholders to ensure they adopt the right approach in accessing the bank’s facilities as the procedure has been simplified for intending beneficiaries by the development bank.
Despite the measures taken by BoI to provide adequate financing for MSMEs the bottlenecks attached to accessing the funds have remained a huge stumbling block to the growth of the sector.