Central Bank Governor Godwin Emefiele has aptly recognised a vibrant Micro, Small and Medium Enterprises (MSMEs) sector as the non-oil export window Nigeria needs to raise its revenue profile, reports Group Business Editor SIMEON EBULU
One of the most cheering news in Emefiele’s detailed presentation on the apex bank’s vision for the next five-years, is his recognition and determination to give the Micro Small and Medium Enterprises’ (MSMEs’) segment the desired push needed to steer the nation’s economy away from its over-reliance (about 86 per cent) on revenues from crude oil to other productive non-oil sectors of the larger economy.
This shift is by no means meant to diminish the impact of crude in leapfrogging the economy, rather it is a measure intended to expand the economic playing field so as to give other commodities the space required to also contribute their quota towards growing and expanding the productive capacity of the overall nation’s Gross Domestic Product (GDP).
It is also instructive from the onset, to give kudos to President Muhammadu Buhari for reappointing Godwin Emefiele to steer the ship of affairs at the CBN and to continue push the programmes he started four years ago. Of equal significance is the CBN chief’s recognition from the very onset of his second term, to appreciate the need to build on what has been evidently one of several areas of his flagship achievement –growing the MSMEs by promoting the production of non-oil products for exports, diversify the economy, create employment and boost Nigerians’ purchasing power.
While unveiling his agenda for the next five years, Emefiele acknowledged the critical role that MSMEs play in growing the economy, saying actualising those goals constitute the reasons why the apex bank has increased development finance interventions to the small and medium businesses.
“Our objectives were driven by the need to increase investments by MSMEs as well as spur consumer spending, as these factors would have a positive impact on GDP growth and employment, as well as the need to reduce the nation’s reliance on revenues from crude oil.”
The CBN chief recalled the contributions from no-oil outputs in the past and how these sustained the country’s economy before the advent of the discovery of crude oil.
Hear him: “At a point in our nation’s history, Nigeria survived on revenues from the non-oil sector, to the extent that we were a dominant exporter of agricultural produce into the global market.” He said the neglect of these primary revenue earners, which include cocoa, groundnuts, cotton and palm-oil, among others, that have been sources of the raw material needs of the industrial sector and that have created employment opportunities for millions of Nigerians, in preference for crude oil, is what has largely reduced the fortunes of the nation’s economy, conscripting it to a mono product economy driven by revenues from crude oil export.
In Emefiele’s words, “The discovery of crude oil and the increasing reliance on crude oil revenues led to a severe downturn in the agriculture and manufacturing sectors, while also exposing our economy to the vulnerabilities that normally accompany an increased dependence on a single commodity for survival,” pointing out that the consequence to Nigeria of that negligence, “is the loss of earnings above $20 billion annually from cultivation and processing of palm oil today if Nigeria had maintained its market dominance in the palm oil industry, which stood at 40 per cent in the 70s.”
Notwithstanding the loss to Nigeria arising from that negligence, Emefiele remains confident, that through its policies, going forward, the CBN will reverse the trend. “We have a responsibility to reverse the current ugly trend where any external shock affecting oil producing countries bring us to our knees,” he said.
To correct this trend and as part of the CBN’s intervention programmes, Emefiele said, the apex bank “launched the Anchor Borrowers Programme which has improved access to finance for over one million small holder farmers, who are leading the bank’s efforts to improve cultivation of agricultural commodities.
Given the importance of the Small and Medium Enterprises and the critical role they play in supporting the growth of the economy, Emefiele said the apex bank has sought to improve access to credit for the MSMEs. He said poor access to credit has been highlighted as a significant constraint to the growth of sector, saying it was imperative to redirect funds to the sector given the impact of the recession in the five quarters of 2016 and early 2017.
He said: “It was more important to restart the flow of credit to MSMEs to enable them engage in productive activities that would support growth. As part of efforts to support this objective, we created a N220billionn MSME funds which has been critical in supporting the growth of MSMEs in the agriculture and manufacturing sectors.”
Emefiele said the CBN will continue to support measures that will increase and diversify Nigeria’s exports base and ultimately help in shoring up the nation’s foreign reserves, pointing out that the apex bank intends to aggressively implement the N500billion facility that was aimed at supporting the growth of non-oil exports that will help to improve non-oil export earnings.
Not done, the CBN chief pledged to continue to work with the Deposit Money Banks to improve access to credit for small holder farmers and MSMEs to ensure that the Central Bank of Nigeria is more people focused, as its policies and programs would be geared towards supporting job creation and improving access to credit for MSMEs.
The regulator’s determined focus in driving the fortunes of the MSMEs is not misplaced, considering the sector’s contributions to the nation’s economy.
According to the Nigeria Bureau of Statistics (NBS), Small and Medium scale Enterprises (SMEs) in Nigeria have contributed about 48 per cent of the national GDP in the last five years. With a total number of about 17.4 million, they account for about 50 per cent of industrial jobs and nearly 90 per cent of the manufacturing sector, in terms of number of enterprises. Although significant growth has been achieved in the MSME sector, there is still much to be done, which is why the apex bank is unrelenting in ensuring that the sector is able to contribute optimally.
A 2010 survey report on SMEs conducted by the National Bureau of Statistics (NBS) in conjunction with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), revealed that the SME sector in Nigeria is strategically positioned to absorb up to 80 per cent of jobs, improve per capita income, increase value addition to raw materials supply, improve export earnings, enhance capacity utilisation in key industries and as well unlock economic expansion and GDP growth.
Despite the obvious benefits in promoting MSMEs, challenges still abound. According to an article on “developing Africa through effective, socially responsible investing”, “there still exists a ‘missing middle’, which finds it hard to access funds due to the category of funding they belong to.” Other challenges encountered by the sector include lack of skilled manpower, multiplicity of taxes and high cost of doing business, among others, nonetheless, SMEs have significant untapped growth potential, including strong export and employment potentials
SMEs in Nigeria are currently distributed somewhat along sectors within regions; creating potential operational and cost synergies. In recent times and consistent with Nigeria’s dynamic investment environment, fuelled by the advent of the internet infrastructure, new growing sectors, including entertainment and leisure clusters Low-Tech Sectors clusters: footwear, clothing & garment, agro-processing (cassava, oil palm and other oils. High Tech clusters: ICTs, Telecom, and Biotechnology (agric and health) and cosmetics have joined the list of vibrant MSMEs in need of exposure and financial reengineering.
Unrelenting, Emefiele said the CBN is embarking on a Targeted Development Finance initiative aimed at building on the success of its Anchor Borrowers Programme and other intervention schemes to support the growth of agriculture and manufacturing with the aim of expanding their production capacities to boost not only the country’s domestic outputs but also improve the annual non-oil exports receipts from $2billion in 2018 to $12billion by 2023.
In addition, he said the apex bank’s intervention programmes will strengthen the linkage between farmers and agro-processors/manufacturers by ensuring that farmers’ products are purchased by agro-processors and manufacturers.
Access to Credit
Emefiele said the CBN is working to encourage banks and financial institutions to lend from their balance sheet so as to support the growth of critical sectors of the economy ,like Agriculture, MSMEs and the Real Estate Sector, stressing that greater emphasis on improving consumer spending and business investment by MSMEs is critical to sustainable double digit growth of the Nigerian economy.
He said MSMEs currently constitute over 90 per cent of businesses in the country, pointing out that through the national collateral registry, over N400 billion worth of movable assets have been registered by MSMEs in the registry.
He said the regulator’s goal is to triple this number over the next three years with the aim of broadening the range of collaterals that MSMEs can provide to banks to enable them obtain credit. This development will help improve access to credit for farmers and MSMEs and also support the growth of their respective businesses, Emefiele said, adding that the recently established NIRSAL Microfinance Bank will work to improve access to credit for MSMEs in rural communities, that would help stimulate improved economic activities.
He said:” In order to reduce the constraints which high account receivables have on the growth and operations of MSMEs,” the CBN “will support the development of a Trade Receivables Portal, which will enable MSMEs trade their invoices with financial institutions in order to improve their cash flow and support ongoing operations of their respective businesses.”
