Sir: In just two months of the swearing in of President Bola Ahmed Tinubu, a number of tough and desirable difficult policy decisions have been taken by his administration. Two of these are the removal fuel subsidies and the floating the naira. Inadvertently, these have translated in the short term to rising inflation rates, hike in fuel prices and lower purchasing power. Micro Small and Medium Enterprises (MSMEs) had already been faced with multiple challenges arising from the misadventure of the recent cash crunch occasioned by Naira redesign. With this recent development leading to higher cost of borrowing, the devaluation of the Naira, increased cost of goods and services, high foreign exchange rates, MSMEs are seeing reducing patronage of their services and struggling to stay afloat.
Micro Small and Medium Enterprises (MSMEs) are the engine room of any developing economy. Nigeria is home to over 36.9 million MSMEs, comprising 96.7% of all businesses in Nigeria. About 67% of these businesses are youth owned. Similarly, MSMEs contribute over 45% to the country’s gross domestic product (GDP), with 98.8% of them in the micro cadre. According to the Ministry of Industry, Trade, and Investment, MSME enterprises also account for about 48.5 percent of the gross domestic product, GDP, as well as about 7.27 percent of goods and services exported out of the country.
Read Also: Industry leaders call for more strategic infrastructure to attain food security
The president’s recent speech shows he clearly understands the need to support the MSME growth. The measures outlined by the president include:
Strengthening the manufacturing sector, increasing its capacity to expand and create good paying jobs by spending N75 billion between July 2023 and March 2024 to fund 75 enterprises with great potential to kick-start sustainable economic growth, accelerate structural transformation and improve productivity with access to N1 Billion credit at 9% interest rate per annum with maximum of 60 months repayment for long term loans and 12 months for working capital.
Energising MSMEs with N125 billion out of which N50 billion is to be spent on Conditional Grant to one million nano businesses between now and March 2024. The target is to give N50,000 each to 1,300 nano business owners in each of the 774 local governments across the country.
Drive financial inclusion by on-boarding beneficiaries into the formal banking system. This will be through funding 100,000 MSMEs and start-ups with N75 billion. Under this scheme, each enterprise promoter will be able to get between N500,000 to N1million at 9% interest per annum and a repayment period of 36 months.
Agriculture and food security was also a major focus as the president has ordered the release of 200,000 Metric tonnes of grains from strategic reserves to households across the 36 states and FCT to moderate prices. There are also plans to provide 225,000 metric tonnes of fertilizer, seedlings and other inputs to farmers. Mr President also shared plans to support the cultivation of 500,000 hectares of farmland; N200 billion out of the N500 billion approved by the National Assembly with N50 billion to cultivate 150,000 hectares of rice and maize. N50 billion will also be earmarked to cultivate 100,000 hectares of wheat and cassava.
These actions indicate that the president is sensitive to the pains of the people, given the level of thinking that has gone into these policy pronouncements. However, there are more steps to be taken.
Government should also provide incentives to encourage local manufacturing of green energy which is a major expense for businesses at the moment. Solar business hubs can also be deployed in major markets or the rural areas to support small scale manufacturing and improve productivity.
Microfinance banks understand the communities and rural areas more than any other financial institutions in the country. They should be the major disbursement channels for the nano grants to SMEs. We propose that NIRSAL MFB be given the mandate for wholesale lending to qualified Microfinance Banks and supervise disbursements through their state and local government officers
Digital Technology should be leveraged on for the conditional grants. This will help drive financial inclusion by using available mobile money technology at little or no cost to the beneficiaries thus reducing the risk of diversion.
A strong monitoring process should also be put in place to ensure that these palliatives get to those who need them most and excessive bureaucracy does not slow down full implementation.
The president’s immediate, mid-term and long-term plans to alleviate the current economic stress on Nigerians are well thought out. The strategic framework for implementation to effectively carry this out should be clearly articulated to guarantee its success. The erstwhile Project Monitoring, Reporting and Remediation Offices (PMROs) established in the 36 States and the FCT by NIRSAL Plc should be a veritable extension services outlet to support these laudable presidential initiatives.
- Dr Steve Ogidan, mni, Abuja.