Chuku Wachuku is the President, Association of Agricultural and Industrial Entrepreneurs of Nigeria, (AIEN), also Former Director-General of Operations, National Directorate of Employment (NDE) and Former National President, Nigerian Association of Small Scale Industrialists (NASSI). In this interview with AMBROSE NNAJI, Wachuku who is in the business of raw materials-based cluster advised the Central Bank of Nigeria (CBN) to support the deposit money banks that bring initiatives that will generate employment and give them interest buy back so that they can advance this money to the entrepreneurs who will create employment. Excerpts:
WHAT is Agricultural and Industrial Entrepreneurs of Nigeria all about?
The Association of Agricultural and Industrial Entrepreneurs of Nigeria, (AIEN) is an association born by members of who want to encourage entrepreneurship development through agricultural and industrial value chain. You do know that the basis of employment generation is the Medium, Small and Micro Enterprise (MSME). So, this is conglomeration of all the indices that will create employment and wealth for Nigerians.
When you aggregate agricultural produce, the endgame is to actually initially create domestic consumption which will impact on prices or create raw materials for the willing/ailing industries in Nigeria which again will create production for the country and also create employment. Employment by any standard will trigger the way we create wages, and employment will trigger demand in the economy and by the time it triggers demand, it triggers a significant supply, so these are areas that interest people to operate in this sphere of the economy and that way create employment and wages, and food and raw material for the industries.
The association which came into being about three years ago its local government driven, we have membership in all the local governments in Nigeria. Because of the importance of raw materials in moving the economy forward, and because of the vision of the Raw Materials Research and Development Council (RMRDC), we came together to reach an understanding which climaxed to signing an Memorandum of Understanding (MoU) to partner with RMRDC, so that’s a strong partnership, and it’s all the RMRDC and AIEN initiative.
What strategies/plans have you put in place to achieve these objectives?
We are concluding negotiations with Deposit Money Banks and Development Financial Institutions. We are promoting the concept of entrepreneurship development; an entrepreneur is the business owner. At the NDE appraised the concept of self-employment as against the deployment. If my goal works and I develop a business for you, you will not only employ yourself but employ other people and that’s how we create employment.
The NDE under me also introduced the concept of entrepreneurship training in all the National Youths Service Corps (NYSC) camps nationwide which is still ongoing. How do I run such a huge project, a critical element of risk assessment is who’s running it, the experience of who is running it. I have that experience, we introduced it into this country, I know what I am doing, and the experts know what they are doing.
How will this initiative impact on the nation’s economy?
First of all we are going to reduce prices, because any time supply is over demand, the price must go down, and any time the demand curve goes over supply the price must also go down. There’s so much demand on the economy such that now there’s importation syndrome in the economy. The Central Bank of Nigeria (CBN) banned certain goods because importation culture is defeating production in the country.
Now what’s militating against the SME, principally is access to finance, so we are creating an eco-system the guarantees the deposit money banks and the development finance institutions a track that they can recover their money. The deposit money banks are paying lip service to SME funding, the CBN had had to intervene in some areas and they came up with different programmes, the Anchor-Borrowers programme, and the commercial agricultural loan scheme among others.
So much money has been released by the CBN, but CBN is lacking in the proper platform to execute these programmes. They have also come up with a system where they penalise banks, so deposit money banks are now clamouring to look for good platform which we are offering to them to be able to advance their lending because the risk factor in the SME sector is so high.
They are afraid to lend but we are coming up with a strategy that will first of all create funds to our members who will own businesses. When they own these businesses, it’s their responsibility to accept the facility, it’s also their responsibility to repay the loan, and it’s the responsibility of the organisation to ensure that these funds are returned. When you inject this capital into the system particularly directed at agriculture, and agriculture value chain we are going to produce food for local consumption, produce food for industrial raw materials, create produce for exports and earn foreign exchange. When the nation is importing less and less we hope it will impact on the foreign exchange rate regime because there’s less pressure on the dollar, you don’t have too many people chasing the dollar anymore, they will be earning foreign exchange.
I’m glad that some deposit money banks that are progressive and proactive are eager to support this raw material based clusters initiative in the agriculture value chain. We are also looking at the creative industry, there’s so much money and so much potential in that area.
Most farm produce are wasted even before they arrive their destination, how is this initiative going to ensure preservation of those products
We don’t even have enough produce, talk less of waste. On our platform, it aggregates production, which is supply and demand of it. So we are going to adopt the strategy of supply chain management such that as you are producing somebody is off taking from you within that same platform. Let’s say this group that we have formed a tomatoes processing industry we are going to be working with them where they will off take all the tomatoes we produce, it’s not even enough, it’s just because there is no organised system to guarantee that.
We are going to eliminate storage requirement because it is going directly from the cluster to the production facility because tomatoes is their raw material, they should avoid storage. What they should be talking about is what means of transporting these fresh tomatoes to their factory. Let’s say you have cooling vans that can transport these tomatoes which is again another business. Our members will be encouraged to own those cooling vans because they have already guaranteed enough cargo, the cargo being the raw materials to the place
So we calculate the returns on that investment, when you take money from a development finance institution, you invest in your business you are expected to make profit. So for each industry we calculate the return on investment to each member to keep him there, we are into research of what the economy looks like, if you go and fund fashion industry designers and they produce more shirts than the economy demands, they will lose profit, they will fall into unemployment again, so there must be that critical gap between supply and demand.
Projects like this oftentimes end up in the pockets of the originator, how are you going to ensure that this initiative benefited many Nigerians?
I am an economist. I pioneered creation of jobs and because I know having been in that field for a long time that’s why I can tell you that government cannot create employment, government does not even have the money to create employment. By the time we would have come to maturity because we are going to put about 500 people but we are starting with 250 people per cluster in each local government by time you put in 500people per cluster in each local government it goes into hundreds of millions of the naira.
You should be asking questions when government creates a budget and the National Assembly appropriates this budget, have you taken track of input and out this funds going into these agencies, what are the deliverables, what have they delivered. If you give this kind of money to government agency, it funds first of all salaries and overhead which gulps over 60/70 percent of the budget, how much is left.
Talking about skills acquisitions, we did skills acquisition many years ago, at my time we were training about 100 000 people in different skills. These agencies you talk about entrepreneurship training, agencies can do that what are the deliverables but the funds we are getting were going directly into production, no overheads because it’s a small businessman. The critical point is that he’s an entrepreneur; he’s a business man, if you go and give it to big officials of government they go to seminars abroad, they acquire huge houses for their operatives/officers, they buy cars, they take fuel subsidies, and it goes down the line. So the bulk of money of the national budget is going into wages and overhead, so when they see what we are doing they will see the wisdom to invest directly into production.
Is there a situation where you can have more than one cluster in a particular local government?
I told you about supply and demand, if you have too much supply over demand the price will fall, if you are producing 10, 000 tons of cassava and the demand is 8000 the price must fall, you must have that gap, there must be a differential between supply and demand. So we will monitor the economy and see what the aggregate demand is because entrepreneur must make money but because now there’s so much supply in the system the price will fall but not so much that the entrepreneur will not make money.
Businessman operates on return of investment, if you are doing business and you are not making profit you are not going to continue that business. So we cannot within the economy of that state create a situation where the entrepreneurs/producers don’t make money, we will always be watching the prices and features. We are not just producing now; we are not looking at short terms we are going to be looking at four to five years terms, a concept that money will be domiciled on the shoulders of entrepreneurs who are the obligors. They are responsible for their borrowing and repayment, but we know our members, we know the cultures of our members, we know who they are and where they are and they will be able to help with extension
Raw Materials and Research which is large member of the Ministry of Science and Technology are research organisation affiliated to the research institute and they fund them, so they give us the improved seedlings that give high yield. They will also provide extension services to each cluster in each local government, they will provide some entrepreneurship trainers that are approved that will also come they are consultants in business development who will train the people on business development, and they have to look at these things as businesses.
How are you going to source land spaces for this initiative, will the state government be involved?
Actually we don’t want government involvement in this, after all how many government projects are working?
The central point is that we are not talking about any state giving us land because they won’t give you. If you depend on the state to give you land, the process of acquisition will take about 3-4years, so we are going to lease land as part of the components of the loan.
We are not going to wait for the state to acquire land, but these lands must be in contiguity in that cluster, we are going to encourage our members go to an area in a local government to lease lands, whether 50 here or 100 hectares but they must be close enough. We are also coming up with a concept that an entrepreneur from any part of the state in the country can own part of a cluster where land is available.
What’s he doing owning part of a cluster in any part of the country because he is an investor, you have a loan of N250, 000 and you want to invest it, when you invest it in a cluster, each cluster of 250 people investing N250, 000 per entrepreneur so that cluster in that local government will attract N62.5m per cluster in the first instance, so we calculated depending on the produce that you are embarking upon.
You should be asking questions
The Anchor Borrower’s programme is not bad in itself, but implementation of the anchor borrower’s programme is faulty, because you do not have the platform that would ensure that funds are recovered. You don’t need to be going through the court requirement which they will never do and I also told them that a lot of the money given to the state was on political grounds.
For a state to borrow the sum of about N2b or N3b on one of the perogramme of the CBN, CBN will ask them to give them the Irrevocable Standing Payment Order (ISPO). So long the state gives you this ISPO you are at liberty to do what you want with their money, which is now the concept of the development finance they are supposed to use it to develop the economy.
So if you do not inject the money into the targeted production base you are not going to get any employment created, so they diverted this money because its political money. But we are saying that this money will go directly to the heart and where it’s designed to go to. Now we are working with some deposit money banks and we are going to encourage the CBN to share the risk with them so that the interest will go down.
The development financial institutions cannot manage the programmes they bring out, they can’t, implementing agencies at the banks are the ones who to manage them. I want to call on the CBN to work with the banks and not just talk about it, but to work with them who have signed MoU with reputable and knowledgeable Business Membership Organisations (BMO), who know their members and share the risks. The banks are afraid because the risk is all on them and the risk cannot be all on them.
What’s the difference between this and the federal government N-Power?
N-Power is creating short term employment by adding staff, creating employment paying them aggregate of N30, 000, it’s a short term benefit which does not generate itself, and they are no creating jobs, if I employ you, you create one job, but if I empower you will not only employ yourself but you will employ five or ten other people
The micro mix involved in this when you employ five people you have created six jobs, these people are earning wages they cannot earn salary. When you create jobs you are creating wages for these people, these wages have the effect of triggering a demand in the economy. When you trigger a demand in the economy you must trigger a consequential supply, that’s that economic micro mix that will create employment in the process, it will increase the gross domestic product (GDP), that’s what the government cannot do, and government does not have the capacity to do that.
Take the 2020 budget of the Federal Government for instance, 70-75percent of the budget is in wages and overhead cost only about 20percent is capital, how is that going to create employment that cannot happen. It must be private sector driven, the CBN has great interventions in their programme but implementation is faulty because they cannot implement it.
Is this initiative going to take place in all the states at the same time or do you have a focus?
We are testing a pilot, together with the partners; we plan for two states per zone that’s 12 states in the pilot. We assume 20 locals governments in each state, it’s the states that show interest in what we are doing that we are going to use as pilot. The states that are conducive, for example if they say a state doesn’t have the land space we are not going to waste our time, when they see the pilot that’s working in other state they are going to create it
There are 774 local governments across the federation, we want to take off in 240 local governments, it’s on competing demand, and we are going to throw it open though we have selected some states based on geographical spread of the 6 zones. We have gone further to negotiate with the off takers, we are meeting with the flower mills association of Nigeria, and their raw materials are maize, cassava and sorghum,
The companies in Nigeria are so stretched and stretched out, some had invested billions of the naira in funding farmers who have note returned that investments in terms of produce because they are taking it wrong. But we are discussing with them to show them the right way to go, we don’t even need their money what we need is their off taker agreement to guarantee supply.
We are discussing with companies in China, we are discussing with companies in Turkey, so these people who need the raw material are talking to us and our platform is one that will tell you the aggregate supply that we have to meet at any time to meet t your demand across the board.
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