The Nation Newspaper

Tag: MSMEs

  • Fed Govt partnering NERC to reduce MSMEs electricity tariff

    Fed Govt partnering NERC to reduce MSMEs electricity tariff

    The Minister of Industry, Trade and Investment, Olusegun Aganga said yesterday that the Federal Government is working with the Nigerian Electricity Regulation Commission (NERC) to reduce the high cost of doing business for Micro,  Small and Medium Enterprise (MSMEs)  through the reduction of electricity tariff.

    Aganga who spoke at the opening ceremony of MSMEs Summit in Abuja,  said the government has also reduced the cost of business registration with the Corporate Affairs Commission (CAC) for MSMEs by 60 per cent.

    He said: “(Small, Medium Scale Enterprises Development Agency of Nigeria) SMEDAN has increased its footprint from 13 states to being present in all the states  in Nigeria in just five months. This has ensured that we are able to reach all Nigerians in each local government area in the country.

    “Additionally,  SMEDAN has decentralised its operations to ensure 80 per cent of its staff are domiciled in the states and only 20 per cent in the headquarters. This measure has also ensured that our services are spread across the country. We have identified and supporting at least one product in the 774 local  government  areas of competitive and comparative advantage.

    “To this effect,  we have formed over 55,000 MSMEs cooperative society in Nigeria,  and registered them with the Corporate Affairs Commission CAC in order to assist thousands of MSMEs have better access to finance and access to business support services.

    “The 2010 MSMEs collaborative survey revealed that the majority of MSMEs particularly the micro enterprises only sell  their products within their local government area. “Through NEDEP,  we are intervening to broaden market access for Nigerian MSMEs.”

    The Director General,  SMEDAN, Bature Umar Masari said the need to access the contribution of MSME subsector to the Nigerian economy partially instigated the National MSME survey jointly conducted by SMEDAN and the NBS in 2010.

    The report clearly shows tgat there are over 17million MSMEs operating within the length and breath of the country.  The survey also evidenced showed that the 17million MSMEs had a cumulative employment of over 32 million.

  • ‘Access to finance major challenge facing MSMEs’

    ‘Access to finance major challenge facing MSMEs’

    What is the major headache of small business?

    Access to finance, according to the head of Department, Business School, University of Stellenbosch, South Africa, Prof Silvanus Ikhide.

    He listed other obsstacles faced by Micro, Small and Medium Enterprises (MSMEs) to include access to power and poor infrastructure.

    Ikehide spoke in Abuja at a conference organised by the group.

    He said other problems included high administrative cost, vague information and lack of collateral to access loans.

    “Our sources of finance, in most cases, are equity and debt; with equity accounting for a greater part of what we have.Micro enterprises depend on micro credit for financing, but researches done have not indicated that micro credit promotes investment,’’ he said.

    Ikhide said micro enterprises in many countries accounted for about 95 per cent of the entire economic activities in the informal sector.He said small enterprises had the potential for expansion in Nigeria, but were limited by their small sizes and poor access to finance.

    “SMEs are very important in job creation in many countries and they have come to about 50 per cent of total employments in these countries. SME finance is a big problem in Nigeria because the sector is small. It accounts for less than 50 per cent of Gross Domestic Product (GDP) compared to what we have in other countries.

    “We believe that a robust SME sector in Nigeria will address the issue of unemployment. This is because we have seen this result in other countries. We believe that if you have a high degree of unemployment of about 70.5 per cent in a country, policy must be focused on SME’s to deal with this issue.

    “Also, the cumbersome application procedure and high interest rate of borrowing in Nigeria should be checked to enable small business owners access funds easily,’’ Ikhide said, adding that the Central Bank of Nigeria (CBN) should balance its role as a regulator, supervisor, guarantor promoter and overseer in assisting small businesses.

    Ikhide also said that micro enterprises were constrained due to lack of information, adding that this could be dealt with by leveraging existing relations.

    Also, the President, Anabel Group Inc., Mr. Nicholas Okoye, said crime, terrorism, lack of education, poor healthcare facilities and unemployment were major challenges that Nigerians face.

    “We need to give young people jobs. We need to do whatever it takes to get young people jobs. If you give people jobs, terrorism, violence, and crimes will become a thing of the past. Job creation is a critical part of economic development,” he said.

  • 15% loanable MSMEs fund for upward review

    15% loanable MSMEs fund for upward review

    The current arrangement where less than 15 per cent loanable fund is  set aside for the Micro, Small and Medium Enterprises ( MSMEs) need, is unacceptable and must be  reviewed upward, the Minister of Industry, Trade and Investment,   Olusegun Aganga, has said.

    Aganga said the step is necessary having regard to the potential of the sector in creating jobs and generating wealth.

    The Minister, who spoke at the inauguration of the board of Directors of Bank of Industry,  BOI, in Abuja,  stated that the future of MSMEs rests squarely on how responsively the bank moves to meet the nations funding needs.

    He said,  “The practice in China and Indonesia where significant portion of loanable in most cases without collateral is extended to MSMEs with close to 97% repayment rate should encourage you to emulate and do even more for MSMEs.

    “In prosecuting this mandate and by extant and institutionalized tradition,  the ministry is enjoined to give policy guidance to the bank and to its other parastatals towards these objectives. The bank and its board are therefore expected as partner in the business sphere,  to vshare in the common national vision towards achieving those objective for which the bank was established.

    “This should and must be done with every sense of duty to ensure striking a balance between tge bank quest for higher dividend and its social obligation to tge nation.  My ministry will soon organize a retreat for all fully implement the NIPR and NEDEP.

    “In the mean time,  tge ministry will track your performance and for that reason, I expect your board to foward to me quarterly progress report showing performance in the quarter and year to date with details of analysis of loan of loan book by sector. impact on NIPR and NEDEP, jobs created and contributions to national development.”

  • Ekiti hosts The Nation’s forum on MSMEs

    Ekiti hosts The Nation’s forum on MSMEs

    A Southwest Regional Integrated Forum on the promotion of Micro Small and Medium Enterprises (MSMEs) will hold tomorrow and Friday in Ado Ekiti, Ekiti State.

    The programme is the third in the Southwest regional integrated programme, organised by Vintage Press Ltd, Publishers of The Nation, in collaboration with CEEDEE Resources.

    It is hosted by the Ekiti State government.

    The maiden edition of the programme was a legislative summit in Ibadan, Oyo State in February 2012. The second edition was a grassroots business expo hosted by Osun State in Osogbo last year.

    According to a statement by Mr. Soji Omotunde, The Nation general manager, Corporate Services, the regional integration programme is tailored to promote regional economic cohesion as a platform for national development.

    He said the programme is a major intervention to boost regional and national economy through the promotion of Micro Small and Medium Enterprises (MSMEs).

    “It is also aimed at being a mode of attracting substantial internally-generated revenue, and solving the high rate of youth and unemployment. It will provide an avenue to look “beyond white collar jobs.”

    The theme is: “MSMEs as solutions to unemployment and economic development.”

    The major areas of focus, he said, would be the showcasing of vast MicroSMEs opportunities and products in the Southwest; providing a platform for inter-regional MicroSMEs opportunities and products; promoting MSMEs as tools for economic development and guiding youths on how to become entrepreneurs.

    The programme, which holds at Archbishop Abiodun Adetiloye Hall, will feature seminar on MicroSMEs, exhibition of common and uncommon MicroSMEs products, IT products, artisanship and locally-manufactured equipment by local entrepreneurs.

    A special attraction at the opening ceremony will be the presentation of a book: Regional integration as strategy for national development, a collation of speeches at the earlier programmes.

    Aare Afe Babalola, founder/president of Afe Babalola University, Ado-Ekiti, will chair the opening where Southwest governors are expected.

    Special guests include Rochas Okorocha (Imo), Rotimi Amaechi (Rivers), Abdulfatah Ahmed (Kwara), Rabiu musa Kwankwaso (Kano) and Comrade Adams Oshiomhole (Edo).

  • GE,BOI sign MoU to support MSMEs with $500m

    GE,BOI sign MoU to support MSMEs with $500m

    General Electrical (GE), a leading infrastructure and technology company, and Bank of Industry (BOI) have announced plans to support small and medium enterprises (SMEs) in Nigeria in the infrastructure sector.

    This is contained in a statement issued in Abuja on Friday by the company’s Corporate Communications Manager, West Africa, Mr Osagie Ogunbor.

    According to the statement, the plan will see funding support to the tune of 500 million dollars made available to critical sectors of the economy like healthcare, power and transportation.

    It added that these sectors would have access to financing for equipment and service contracts as well as management and technical training over a period of at least five year.

    Speaking at a briefing, the Managing Director of BOI, Ms Evelyn Oputu, said that the initiative was intended to support the establishment, modernisation and expansion of high technology SMEs.

    She said that the initiative would also provide the companies with more competitive platform to recruit and retain highly skilled Nigerians currently with leading organisations outside the country.

     

  • CBN okays offshore capital for Finance Houses

    CBN okays offshore capital for Finance Houses

    • Rolls out guidelines for subsector

    The Central Bank of Nigeria (CBN) has released new guidelines for Finance House (FCs) operations in the country. Under them, operators can raise offshore funds to recapitalise, but such funds must be approved by it.

    The draft guideline obtained exclusively by The Nation over the weekend, said the FCs were envisioned to operate within the middle tier of the financial system, with a focus on the Micro, Small and Medium Enterprises (MSMEs) segment.

    The FCs sub-sector is to play complementary roles to banks, bridging financing gaps and meeting the financial needs of its target customers. However, FCs have not demonstrated the capability required to thrive in this space. This has resulted to underperformance of the sub-sector and aroused the concern of the CBN and other key industry stakeholders.

    The guidelines noted that as part of the initiatives to establish financial stability within the financial services industry and the FC sub-sector in particular, the CBN undertook a review of the Guidelines for Finance Companies. These Revised Guidelines were issued by the CBN in exercise of the powers conferred on it by CBN Act 2007 and the Banks and Other Financial Institutions Act 2004 (BOFIA).

    It added that the Revised Guidelines are to regulate the establishment, operations and other activities of FCs; replace the existing Guidelines for FCs and should be read in conjunction with the provisions of the CBN Act, the BOFIA, as well as written directions, notices, circulars and guidelines that the CBN may issue from time to time.

    The guideline stipulates that an FC, unless otherwise stated, means a person or company licensed to carry out FC business. FC business means the business of providing financial services for consumers and industrial, commercial, or agricultural enterprises.

    The guideline also states that FCs must demonstrate compliance with the CBN Code of Corporate Governance and show evidence of a competent, independent board as stipulated in the CBN Prudential Guidelines for Licensed Banks, among others. It said the board shall have a minimum of five and maximum of nine directors, with not more than 50 per cent non-executive directors.

    It said the Board shall have a minimum of one and a maximum of two independent directors.

    The maximum tenure of two terms of four years each for independent directors.

    ”The tenure of the chief executive officer and directors of finance companies shall be limited to a maximum of two terms of five years each. However, the CBN recognises the need for proper transition and shall define proper transition guidelines and timelines for implementation,”the guideline stated.

     

    It said the Board shall lay down a code of conduct for all Board members and senior management staff. All Board members and senior management personnel shall affirm compliance with the code on an annual basis.

    “To qualify for the position of a director in a Finance Company, it is required that the person(s) must not be current employees or directors of banks or other financial institutions, except the Finance Company is promoted by the banks or other financial institutions and are representing the interest of such institutions,” it said.

    It added that in circumstances where current directors or employees of banks or other financial institutions are proposed for the position of director in a finance company, the consent of their employers must be given in writing to the CBN.

    “Conversely, in circumstances where current directors or employees of finance companies are proposed for the position of director in a bank or other financial institutions, the consent of their employers must also be given in writing to the CBN,” it said.

     

  • Shoring up MSMEs

    Shoring up MSMEs

    Small and medium Enterprises all over the world have been a panacea to economic growth. Bukola Afolabi takes a look at their crucial position in the economy and strategies to make them more relevant

    Globally, they are the drivers of many economies and this pivotal role has been recognised in many countries. In Nigeria, despite tottering steps, their impact has been felt. But it can be felt more. Under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) the meaning of the terms Micro, Small and Medium enterprise is understood with respect to the investment made in the plant and machinery/equipment. The investment limit for each enterprise is as follows:

    According to Bank of Industry, the source of finance for many SMEs, Micro enterprises mean a business with a capital investment of not more than one million naira only which includes a working capital but excluding cost of land and or a labour size of between one and ten workers. Small enterprises are industries with capital investment of over N1.5m only but not exceeding. While Medium Enterprise are industries with a capital investment of over N50m only but not more than N200m including working capital but excluding cost of land or a labour size of between 101 and 300 workers.

    The central bank of Nigeria defines Small and Medium Enterprise in Nigeria according to asset base and number of staff employed. However, it is important to understand the classification and to avail the benefits accordingly, as some of the sectors are specifically reserved for to avail loans relatively easily and at lower interest rates.

    MSMEs’ Contribution

    to the Economy

    MSMEs contribute to the creation of wealth, employment, and income generation, both in rural and urban areas, thus, ensuring a more equitable income distribution. They also provide the economy with a continuous supply of ideas, skills, and innovations necessary to promote competition and the efficient allocation of scarce resources.

    In the last five years, the MSME sector accounted for about 99.6% of the registered businesses in the country by which 63% of the labour force earn a living. Around 35.7% of the total sales and value added in the manufacturing come from MSMEs as well. But the object of MSMED Act 2006 is to facilitate the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental. Under this Act, a micro or small enterprise or a medium enterprise engaged in providing or rendering of services may file the memorandum to the authority at discretion.

    Financial inclusion

    While some state governments in certain areas declared certain benefits and tax concessions on certain grounds to some SMEs, because of the Federal government policy on SME, the central bank introduced micro finance bank to make financial inclusion to come to pass.

    “There is pressing need to address these constraints as a first step towards achieving inclusive finance, particularly among the poor and low income segments of the population,” Paul Eluhaiwe, director, Development Finance department of the CBN said.

    “The aim is to empower millions of the unbanked Nigerians in the financial system to become viable economic actors. The role in economic development, measures being adopted to forge financial inclusion by selected countries and the attempt being made by Nigeria to follow suit.

    “The achievement of financial inclusion goals requires the participation of an array of institutions which service large scale, medium, small and micro enterprises. In many countries, commercial and investment banks provide financial services for industries and large scale enterprises.”

    Eluhaiwe noted that as financial inclusion programmes continue to attract increasing attention of stakeholders, promoters are becoming concerned about critical factors that will ensure effectiveness and efficiency in services delivery. One of these factors is financial identity. Financial identity is being highlighted as a key risk management strategy in financial inclusion programmes. Given the low literacy levels of poor people in developing countries, and absolute lack of methods for registration of subjects, financial identity presents a serious hurdle to financial inclusion. While large transaction clients might be able to provide means for their identification such as identity cards, driving licenses and international passports, this does not apply to the poor people.

    Financial literacy, Eluhaiwe said, was an important component of inclusion that would support better delivery of financial services by educating the targeted excluded sects, ultimately creating informed financial service providers and better informed users.

    “The combined effect of these provides for better credit and better portfolios, all of which will support institutional viability safety and soundness. Increased economic activities particularly from the MSME subsector would boost exports, increase foreign exchange earnings, stability of exchange rate and ability to manage foreign reserves. Increased use of mobile payments system will reduce expenditure of currency issues and management and this could free resources for other development of important sectors such as infrastructure, health, education and public utilities.

    Also speaking on Measurement of Financial Inclusion in Nigeria, Professor Olu Ajakaiye, from University of Ibadan stated that the operations of financial system are crucial to people’s savings, credit, payment and risk management needs. More importantly, the inclusiveness of this system tends to benefit the poor and other disadvantaged groups in the society.

    The heightened interest in Financial Inclusion (FI) by developing economies can be traced to the literature on the effect of financial development on economic growth. For instance, many studies have established that financial development tends to increase economic growth and reduce inequality and poverty.

    Increased savings can be engendered by including the poor and disadvantaged groups in the formal financial system. Given their large numbers, this small saving group represents a means of financial diversification which can enhance financial stability and economic growth of a country. However, when financial development is not being entirely inclusive; especially when it tilts heavily towards the wealthy, it may dampen economic growth.

    This perhaps explains why financial developments experienced by some countries have not effectively translated to their growths. But, for Nigeria to grow, the MSMEs must be encouraged to soar.

  • New national MSMEs policy underway

    New national MSMEs policy underway

    The Federal Executive Council, FEC, will likely approve the implementation of a new national policy for the Micro, Small and Medium Enterprises (MSMEs) sectors of the economy.

    Recent data provided by the National MSMEs collaborative survey put the number of MSMEs in Nigeria at 17.6 million, employing about 32.4 million people, and contributing about 46.54 percent to GDP.

    The Minister of Industry, Trade and Investment, Dr. Olusegun Aganga, gave this hint while fielding questions from Trade and Investment correspondents during a capacity-building programme organised by the ministry in Abuja, recently.

    Aganga disclosed that the old MSMEs policy had been revised and the new one which is adapted from UNCTAD’s Entrepre-neurship Policy Framework recommendations will be endorsed by FEC early 2014.

    “The National Policy on MSMEs dates back to 2007. After five years of implementation, the government decided to revise it, taking into account feedback and lessons learned, and updated it in order for it to be in tune with current challenges. The revised MSME policy and entrepreneurship strategy extensively integrated UNCTAD’s Entrepreneurship Policy Framework recommendations.

    “It delineates several programmatic areas, namely: national entrepreneurship strategy, finance, institutional, legal and regulatory framework, human resources development, technology, research and development, extension and support services, marketing, infrastructure, awareness and networking.

    “The revised policy proposes an institutional framework for policy implementation and monitoring, with SMEDAN as the primary responsible institution and the establishment of the National Council on SMEs as the apex organ for MSMEs development. It also includes an action plan and the institutional framework for implementation.

    “Business associations, government officials, and relevant private and public sector institutions, engaged in the constructive review with the Small Enterprise Development Agency (SMEDAN). The government aimed to ensure that the new national policy took stock of international best practices in MSMEs development, and responded to current challenges.”

  • The open leather trade

    The open leather trade

    The job prospects in the leather industry appear limitless. With little education, all a job seeker needs is to acquire the requisite vocational skills to end his misery. TOBA AGBOOLA reports.

    Leather is derived from animals, hides and skin. From his raw state, it is turned into footwears, bags, upholstery and other accessories. The tanning of leather can boost the economy of a country like Nigeria which mainstay is oil.

    Experts say the industry has the potential to generate foreign exchange (forex) and employment, especially for micro,small and medium enterprises (MSMEs), boys and girls.

    According to a report by the Centre for Research and Documentation (CRD), if appropriate standards and regulations are institutionalised, franchise production agreements can be entered into between industrial tanneries and shoe manufacturers to boost the productivity of MSME leather producers; and create over 500,000 jobs across the value chain, particularly for youths and women.

    Shoe and hand bag making business requires little education. Just as there are lawyers that have dumped their wigs and gowns for leather shoe and bag making business, so also are people who are not educated.

    For young school leavers desirous of becoming car and home upholsters, all that is required is a vocational training of between two and three years, depending on their level of intelligence.

    It could, however, be shorter if the apprentice catches up on time. So, discovering the hidden fortune in the leather industry, though shoe and bag making does not require any hard and fast rule concerning educational requirement.

    Another potential job area are the tanneries. According to CRD, there are 41 tanneries in the country, with 30 in Kano. All these tanneries have become dormant. If the right policies are adopted, jobs will be created to stem violent crime, restiveness and insecurity.

    Particularly, women will have the opportunity to design and market finished leather products, allowing them to work from home and taking care of their kids.

    Grazing reserves will inevitably be established to assure security and availability of availability of modern veterinary services and extension services. This will create jobs for veterinary doctors and others along the value chain too while it will lead to the improvement in livestock yield as well as in the quality of the hides and skin which are the major raw materials for the industry.

    According to sector analysts, there is potential to tap into the growing domestic, regional and international market for hides and skin and leather products. The export market for raw hides and skin is said to be worth about $4.4 billion, $14 billion for rough tanned and finished leather and $25 billion for footwear with leather uppers.

    Chemonics International, last year projected that Nigeria has the potential of generating about $140 million per annum from leather products.

    It is hoped that the Leather Sector Revolution Committee set up by the Federal Government with the mandate to turn around the fortunes of the leather industry will walk their mandates.

    With representatives from the Ministries of Finance and Agriculture, the Small and Medium Enterprises Development Agency, Kano State Ministry of Commerce, Aba Shoe Cluster and the United Kingdom Department for International Development (DfID), among others, the committee has to deliver a comprehensive blue print for the sustainable development of the industry.

     

  • MSMEs create 32.4m jobs

    The Micro, Small and Medium Enterprises (MSMEs) sector has employed 32.4 million Nigerians, and contributed 46.54 per cent to the nation’s Gross Domestic Product (GDP), the Director-General, Small and Medium Enterprises Development Agency (SMEDAN) Bature Masari has said.

    He told The Nation that the importance of entrepreneurship cannot be overemphasised as research has shown that MSMEs are critical to the growth and economic development of nations, contributing not less than 50 per cent of GDP on the average, income generation, wealth creation and poverty alleviation.

    “In Nigeria, according to the national survey on MSMEs by SMEDAN and NBS (National Bureau of Statistics), we have over 17.2 million MSMEs, employing 32.4 million Nigerians and nominally contributing 46.54 per cent of the nation’s GDP at the period under review,” he added.

    He said to reposition MSMEs for economic development, one of the strategies SMEDAN has adopted that needed to be sustained is strengthening entrepreneurship along the value chain of the typical business cycle.

    He said from start-ups, the body looks at the business conception/idea generation, project identification, feasibility study, business plan, sourcing for finance, programme execution and implementation, evaluation and control, sales/marketing.

    He said poor access to affordable finance, leading to inadequate working capital, remained the bane of the MSME sector, despite its potential as the engine of economic growth.

    According to him, despite SMEDAN’s efforts to partner with the Bank of Industry (BoI), businessmen in the sector still find it difficult to access funds due to high interest rates.

    Masari said if the sector was adequately funded, it would reduce the high rate of unemployment among the youth as well as increase the country’s gross domestic product.

    He said: “Nigeria is suffering because this is a sector that remains the engine of economic growth and a contributor to job and wealth creation, and poverty eradication but has been neglected.

    He said the MSMEs had transformed many economies, adding that urgent actions should be taken to address some of the challenges in the sector.

    He said: “Let’s get all hands on deck and stop paying lip service to matters affecting this all-important driver of economic growth.

    “The government must come up with good policies, with appropriate people to implement them, for Nigeria to have the sustainable economic development to be among the 20 top nations of the world by 2020.”