OLAWALE FASANYA: Preference for Imported Products Killing MSMEs in Nigeria

For a sector that provides 87% of the total employment generation in Nigeria and 48 per cent of the GDP, it is not a surprise that the current administration has continued to channel its poverty alleviation programmes to the people through the micro, small and medium enterprises platform. The Director General/Chief Executive, Small and Medium Enterprises Development Agency of Nigeria, Mr. Olawale Fasanya, in this interview with Festus Akanbi and Gboyega Akinsanmi, offers tips on how to raise the performance bar of the MSMEs

As the administration of President Muhammadu Buhari begins to wind down, how has it benefited MSMEs in Nigeria?

Honestly, this administration has been very supportive of MSMEs, especially in the wake of COVID-19. Apart from supporting over five million MSMEs, the survival fund was able to support several organisations. In addition to the post-COVID-19 support, the administration has been at the forefront of MSME development. About four years ago, we started the MSME National Clinic. Under this programme, we went around nearly all states of the federation. As a result of the clinic, the National Agency for Food and Drug Administration and Control was able to reduce the charges for registration and certification. NAFDAC was able to approve that something can be done in your backyard. If you are not producing products that can be easily contaminated, for instance, you are allowed to do so within the precinct of your compound. You do not need to have the usual three rooms or one particular specification or acquire a factory before you can start production. This has helped our MSMEs. It is a result of government’s intervention.

Despite all the benefits you highlighted, the business environment is relatively harsh, especially concerning the ease of doing business. What is SMEDAN doing to overcome the challenge of a harsh business environment? 

We all know that the federal government has been particular about the ease of doing business. They created the Presidential Enabling Business Environment Council to look at diverse issues around the ease of doing business. And the council has achieved a lot because the federal government put in place some initiatives to assist in that area. Also, the federal government came up with an intervention that provides for MSMEs. As a result of the intervention, NIRSAL Microfinance Bank came on board. NIRSAL too has to fund several businesses. We know all these interventions because we are part of the agencies that trained the people. Based on our certification, MSMEs secure funds from NIRSAL. Under this administration, the Bank of Industry has done a lot. BOI is one of the development banks that assist MSMEs in the country. In the past, BOI was fully capitalised. Today, however, BOI has a lot of funds that are meant for the development of MSMEs. In addition, BOI has counterpart funds with some state governments. Even down to the grassroots, a lot of people have been able to access some of these funds. For us, as an agency, this administration has given us a lot of leverage. Most of our programmes that were hitherto not funded are now being funded. And in turn, it has a multiplier effect on the ecosystem of MSMEs. It is under the Buhari administration that we started one of our flagship programmes called the conditional grant scheme. This scheme has been able to fund businesses at the bottom of the business pyramid. These are businesses whose capital bases are not more than N10,000. But we injected N50,000 into their businesses. We call it one-man nano businesses. We also make them bankable by opening bank accounts for them. We register some of them with the Corporate Affairs Commission. We equally train them. 

How long has SMEDAN been implementing the conditional grant scheme? How many people have benefitted from it nationwide so far? 

We have been implementing all these initiatives for the past four years. We have been to 774 local government areas across the federation. We identified between 50 and 100 promising nano businesses in each of the 774 LGAs. We have been able to dispense these grants to those MSMEs we identified. It is not a loan. So, it has helped a lot of MSMEs. We have been able to implement the conditional grant scheme because the federal government gave us support. Besides, our one council, one product has been fully funded. We were able to go to different LGAs. We identified businesses in the same value chains, especially cooperatives at the local level that we could support with automated technology that would enable them to improve their processes. For example, if you are producing palm oil or groundnut oil and you can produce two gallons per day, we look for a machine that can help you produce ten gallons. What we do is buy the machine for you and use it as a common facility. In the end, they pay back 70 per cent of the total cost and we write off 30 per cent. There is no interest in this facility. We have already covered all senatorial districts across the federation.

 Because of funding, however, we cannot do it on local government bases. We identify three cooperatives in each senatorial district and provide support for them. 

The programme is still ongoing. It has enhanced the output of several MSMEs. We have been able to implement all these programmes mainly because the federal government enables us. If not for the support of the federal government, we will not have been able to implement the programmes.

Given all the benefits you have outlined, what is the outlook of our MSMEs with respect to the GDP, employment and other economic indices?

In terms of contribution to our gross domestic product, it is the MSMEs that are enhancing our economy and creating employment opportunities nationwide. As we are talking about now, MSMEs account for about 80 per cent of employment in the country, according to our last survey. Concerning the GDP, currently, it stands at about 48 per cent. MSMEs are critical business actors that are their local governments. They produce water for themselves because of the acute infrastructure deficit. That is why we are now laying more emphasis on competitiveness. We know we may not be able to address the challenges of infrastructure. Just like the case of palm oil that I cited, however, we are now identifying organic clusters. There are a lot of clusters across the federation. All we need to do is to go in and provide them with common facilities. This will reduce the cost of each person buying diesel or providing facilities that he needs for production. If we go to a cluster and there is an opportunity for them to install solar power, then it will reduce the cost of production drastically. If in a cluster they can identify the market jointly, 20 persons can come together to supply a particular big company. This is what we are doing here to serve as a linkage too.

Competitiveness is an area of concern for MSMEs in the federation. Why are our MSMEs not competitive and how can they overcome this challenge?

 We know it is not easy, though our MSMEs are trying their best to stay in business and compete both locally and continentally. However, MSMEs in Nigeria cannot compete globally because of the country’s infrastructure deficit, especially in power supply. Despite the infrastructure deficit, you will be amazed, our MSMEs are still trying their best to stay afloat. It is just that there are several issues. For example, even in Nigeria, most times, we have been saying people should buy made-in-Nigeria products. But people prefer to import products to those that are locally produced. So, we all have to change our mentality. As far as it is concerned, however, the federal government is trying its best. The challenge of infrastructure is something that gives the federal government concerns. As we are moving forward, we will be able to resolve all these issues. Nevertheless, our MSMEs are doing well. We took some of them out of the country recently. You will not believe their contributions. At times, we do not believe what we have. If you go to other countries in West Africa, you will know Nigeria is still the king in terms of even the cost of food, accessibility and all that. When you get there, you will find products coming from Nigeria. Daily, a lot of vehicles leave Aba for the west coast. Sadly enough, they are not documented. That is why we do not know their real contribution. When we are talking about a six per cent contribution to exports, all these efforts are not documented.

In terms of exports, what are the policies put in place for our MSMEs to take advantage of the Agreement Establishing the African Continental Free Trade Area?

 On the issue of export, we are working closely with the Nigerian Export Promotion Council to see what we can do to assist our MSMEs. We have started sensitising MSMEs. We have started training them. We went to about 12 states of the federation recently. We brought together MSMEs from the focal states. We also facilitated experts to train them about branding and packaging. We brought the experts to talk to them about what they needed to do so that their product package will improve. What we are now looking at is if we have common facilities for packaging, our MSMEs do not have to be the producers and packagers at the same time. It means they can outsource their packaging. Several MSMEs are already embracing this option. Once they have finished the products, they outsource their packaging. They get somebody who is into packaging and who can service many MSMEs so that they do not bother themselves about packaging. Likewise, we are working with the Nigerian Export-Import Bank to make sure those that are export-ready can access some level of finance to help them. On our own, we are taking MSMEs that have good products out of the country. Recently, I met the acting Director-General of NAFDAC because most MSMEs have good products, but they do not have certification. I asked the helmsman of NAFDAC: what can we do about it? He promised that we should sit down and look at some issues. First, we agreed to create more awareness. Second, we agreed to look at the certification process and how we can shorten it. Third, we agreed to look at the cost of certification and how we can reduce it so that several MSMEs can be able to access certification. If we can solve all the issues I just outlined, we will be able to get a lot of MSMEs to take advantage of the AfCFTA. As I said, however, what we are doing now is to sensitise them and build their capacity so that they will be able to take advantage of the AfCFTA. So, that is what we are doing as an agency. As I said, we are ready. We are partnering other government agencies that have something to do with MSMEs so that all these issues can be resolved once and for all. Such agencies are NAFDAC and the Standard Organisation of Nigeria, among others. These are the key agencies. If MSMEs do not have the certification to enter into the export market, their products will be rejected. Once we can resolve all the issues, our MSMEs can take advantage of the export market.

What is the update about the issue of the mass registration exercise?

 As of today, we have about 3.2 million people that are already on the platform. Now, why is it important for MSMEs to register on the platform? First, it means we now have the data of our MSMEs. It means we can link you to the market. It means we can link you to investors. It means once you are on that platform, you can benefit from our programmes because we know where you are and what you are doing. For example, somebody may be producing coconut oil in Abuja. You may not need to come to Badagry to access raw materials. Perhaps, there is somebody bringing coconut to Abuja that you do not know. So, we will be able to link you up. You are a fish farmer and somebody that is not far from you is producing fish feed. We will be able to link you up once we have your data. If we do not have such data, we will not be able to play the role of linking our MSMEs together. Of course, when we survey with the National Bureau of Statistics, the survey only gives us numbers. On that platform, we can see what we can do to solve the problems of those who have registered with us. For example, my priority is for us to do what we call business development services or provide advisory services for our MSMEs. How can we render such services? We plan to look at those who have registered with us and where they are located. We will send our field officials who will go and visit them where they are doing their business instead of classroom training. We can only be able to render such services if we have the data of all our MSMEs. We will look at the businesses in the same area, those within the same value chains and what we can do to enhance their competitiveness. We will not just sit in the office and only when we organise capacity-building programmes. We will also go out and talk to our MSMEs. We are training all officials now, and they are going to be field officers. We are also talking to the state governments that are willing to partner us. We are engaging them to identify 100 or 200 youths that we can train. If we train them, the state governments can decide to give them stipends of N20,000 or N30,000 monthly, especially those who are not gainfully employed among them. They can complement our efforts of providing business development services. We are already looking at these options. In the case of registration too, we have identified a lot of businesses that can access micro-insurance. If a business suffers a fire incident, for instance, we are already talking to some insurance providers. Already, one insurance organisation has agreed to provide health insurance for micro businesses. If they are not registered with us, they will not be able to benefit from this scheme. If you register with us, it means you have a unique identity. So, that unique identity and certificate will help our MSMEs access some of our intervention programmes.

Most businesses complain a lot about multiple taxations. I remember there used to be a collaboration between SMEDAN and the Federal Inland Revenue Service. What is the federal government doing to address these concerns? 

First, we have been working closely with the FIRS. At some points, we were having joint town hall meetings to sensitise our MSMEs. But our concern has always been about multiple taxations. Apart from FIRS, there are other layers of taxation from state and local governments. What we are doing is just playing advocacy roles. We talk to the state governments. We talk to the local governments. We engage them to see how some layers of taxation can be reduced. We have also been talking to FIRS about the possibility of giving tax holidays to MSMEs from when they start their businesses to when their businesses become stable. All these proposals are on the table. Since I came on board, I have been saying that SMEDAN cannot do it alone. We need collaboration with other organisations. We want to synergise with other organisations. FIRS is one such organisation. I told you that we had been to NAFDAC. We are already working with the Nigerian Export Promotion Council. We will intensify efforts with FIRS too. We have already written FIRS that we want to pay a courtesy call. These are some of the issues that we will tell them about. We will engage them on what they can do to reduce multiple taxations. Apart from FIRS, we also need state and local governments because they are the ones putting different layers of taxation. The issue of taxation must be on the front burner. If we are going to make significant progress, especially with the new regulations of the Central Bank of Nigeria, it means a lot of SMEs will now come into the tax nets because you cannot do business using cash anymore. Some of them that have never been in the tax net will now be captured. Since all of them will now be in the tax net, there should be a way to reduce their tax burden or grant them tax holidays so that we can encourage more people not to evade taxation.

Just like infrastructure deficit, insecurity presents huge challenges for the MSMEs. From your previous studies, can you share the level of damage insecurity has done to small businesses and how has your agency been helping them to overcome this challenge? 

I may not be able to give you the exact figure or percentage. But we all know that the level of insecurity has affected businesses negatively in this country. For example, a lot of farmers have abandoned their farms because they are afraid. This is where raw materials are largely coming from. A lot of mining sites have been abandoned. Miners cannot access their mining sites because of danger within those areas. At the federal level, I know the government is trying to resolve these problems. What we want to emphasise is what we can do for businesses that are within clusters. If businesses are in a cluster, for instance, providing security within the cluster will be easier than dealing with individual businesses. Providing facilities within clusters will be easier. That is why we will keep putting pressure on the state governments that can assist to look at these clusters and provide us with what it takes for those clusters to operate freely. The level of insecurity, especially in some parts of the federation, has affected businesses. That is the reason for the drop in the number of businesses that we witnessed recently compared to four or five years ago, when the level of insecurity has gone bad. As an agency, the issue of security is beyond us. We believe the federal government is trying its best. For us, at our level, we will keep telling MSMEs to operate within clusters. If they operate in clusters where four or five businesses come together, it is not easy to go and attack, unlike the case of individual businesses. For us, we will keep emphasising businesses coming together or operating within clusters even in terms of production.

Can you give more insight into the implementation of the conditional grant scheme?

 We have been to all LGAs across the federation. A lot of people have been able to benefit. We started the conditional grant scheme about four years ago. Across the 774 LGAs, at least between 100,000 and 200,000 MSMEs have been able to benefit. The scheme is still on-going. We have covered 774 LGAs already. We are now starting all over again next year. This has benefited a lot of nano businesses. These are one-man businesses that banks do not reckon with.

 What do you want to be remembered for after your tenure as the DG of SMEDAN? Put differently, what is the focus of your leadership?

As the Director-General of SMEDAN, I am looking forward to a situation where after my tenure, MSMEs have been able to contribute more to the GDP; MSMEs have been more competitive and we have been able to build the capacity of our MSMEs across the federation. For instance, we just concluded our SME Business Development Conference 2022 today. The conference is part of our initiatives in terms of ensuring that the national policy on MSMEs is effectively implemented. In the past, we had this policy. Then, policies were there; there was no tracking system. The highlights of the policy are not usually implemented. Apart from interacting with stakeholders so that we can redesign our programmes, we have focal persons representing all government agencies that have one thing or the other to do with MSMEs. The agencies regularly meet. If the problem of MSMEs is NAFDAC registration, there is somebody that is from NAFDAC in that focal group. There is somebody from SON. There is somebody from BOI. The representatives of NAFDAC will take it back to their offices. By the time we meet again, they come back with results, especially in terms of key areas identified by the policy. If I can achieve all these priority goals, I will be a happy person by the time I am leaving.