The Registrar/Chief Executive Officer (CEO), Institute of Business Development (IBD), Mr. Paul Ikele, says Nigeria is yet to leverage on her resource endowment and population to become globally competitive. He regrets the focus on politics at the detriment of the economy. Most operators of Small and Medium Enterprises (SMEs), which should help put the economy on the path of sustainable growth, he argues, are weighed down by lack of business development plan and dearth of critical infrastructure. In this interview with Chikodi Okereocha, Ikele says the nation’s dream of being one of the top 20 economies in the world by 2025 is, however, achievable “if we are focused.” Excerpts:
How would you assess the pace of Nigeria’s economic development? Is the economy on course?
Nigeria, like any other emerging economy, is bound to have some hiccups here and there. But, if we are focused we will identify the key areas we need to work on like provision of infrastructure, which will assist the economy to bounce back. And of course, you know Nigeria is operating a mixed economic system, which means we are mixing command economy and market economy. And in the mixed economy of course, price will keep rising depending on the cost of production and to that extent the supply may not meet up with the demand because of the scarce resources. For example, in a mixed economy, for you to be able to put up a particular product you need some infrastructure to be able to produce, like power.
A lot of organisations need to power their industries to enable them continue to produce and the electricity is not there. You must operate with a generator and must buy fuel, and these also increase your cost of production. At the end of the day, you have to calculate your cost of production to determine the price you want to sell your products. Because you are not sure of who will buy at the price you have fixed, so you limit your production until you have identified those who will buy at that price you want to sell to enable you cover your cost of production. There is also the political dispensation.
Considering the factors, would you say Nigeria’s dream of emerging as one of the top 20 economies by 2025 is achievable?
Yes, of course! Although, most of them that are there had a long term plan and they worked towards it. But there are lots of issues-political, tribal and things like that. By the grace of God we will achieve it. Recently, I was in a programme in the United Kingdom (UK) where it was actually mentioned that Nigeria can attain the position of one of the top 20 economies by 2025 and can favourably compete with Japan and other developed economies. One, because of our resources, our population, and the opportunities that Nigeria has.
Is Nigeria taking the advantage of her population and resource endowment to achieve that goal?
Yes, we are. Its only that the political situation is not helping matters. Right now, the economy is drifting. The focus is now on politics. It shouldn’t have been like that. In fact, politics should not change the economy by 10 or 20 per cent, but right now politics is almost taking 50 per cent and because of that we are losing focus. Nigeria has almost stopped production waiting for the result of the coming elections. That is wrong. We should differentiate between economic system and politics; let politics be solely on administration and then the economy should drive itself based on the activities and the factors that promote that economy.
Of course, 2025 is by the corner, about six years now, a lot of things can still happen if we are focused. Even if its not achieved, at least, we can make 50-60 per cent progress. It is achievable all things being equal.
Much has been said on the need to attract more investments. Would you say enough efforts are being made to that effect?
When I was in the UK, some groups from India and China were asking some key questions about investments in Nigeria because they saw that there are a lot of resources Nigeria has, which their country does not have. Of course, the investments are coming, both local and foreign, because Nigeria operates an open system. There are also lots of Nigerian investors like Dangote, who is investing in Kenya’s oil industry. Again, because of global issues, people are being attracted to do business with Nigeria no matter the security and other challenges we have.
Why is the economy not globally competitive? What are the major challenges?
Nigeria is a growing economy. If you see the ratio of our development, let’s say between the rich and the poor, there is still a gap; we don’t have a middle class unlike the developed countries. Go to countries like the United States (US) and the UK there is a middle class. The middle class has people that are focused, they don’t even want to be rich. These are people, who even when they marry, do not even want to have children, they just want to work. They are people, who after going to school want to travel out with other things entirely on their minds. But in our situation if you are not up there you must be down there. So, because of that the economy is not moving at the speed that is expected. It has made some people to be gullible and greedy. It has even turned some people into criminals because they want to make it at all cost. Some get involved in advanced fee fraud, otherwise known as ‘419’, whereas they would have walked the ladder and get there.
So, the problem is that the middle class is difficult to sustain. For the middle class to be sustained there has to be a standard arrangement so that people will stop day-dreaming. For instance, in Nigeria you see all kinds of cars. Nigeria is like a dumping ground for all kinds of cars, there are no controls. Our tax system should have been used to control the influx of some of these goods and services. Our tax should have been the focus of government. As at today, a lot of funds are being wasted. In fact, the waste in Nigeria is huge. It is part of the hindrance to our economic development.
What is responsible for the sudden disappearance of the middle class?
Because of the economic values Nigeria has, which is, if you are not rich nobody cares for you. The government has not really done much to encourage the middle class. I don’t know how many people in Nigeria are satisfied with what they are getting. When you want to be satisfied, you face problems either from security issues or from religion, or from government, or from where you are coming from. That is why some people, who were at the middle class, before you knew it they came down to zero class; looking for a way to even survive, which is wrong.
The government should have worked so hard to encourage the middle class. You must have a plan and a focus of what you want to do and how you want to do it. And when you fail, you should do an evaluation to find out why you didn’t get there, what caused it and analyse those causes. Failing is not the issue, rising is. But in most cases people cannot even rise because they don’t know why they failed. If plans are put in place, the middle class will return. All hands must be on deck to achieve it because it is at the middle class that you have the three basic things-food, shelter and clothing.
How can the Small and Medium Enterprise (SME) sector be supported to grow?
The SME sector is very important. In fact, China started when they closed the wall. Chinese said they want to determine whether they want to survive or not. They call it ‘sachet businesses’ or ‘sachet marketing’. They live in cottage system where they can buy and use what they can afford. And again, its better to start business small and grow big. Identify your core market requirements within your environment, provide those needs, provide the products and services and ensure that people within that area are able to buy them.
An SME does not require large capital, it operates within a short-term plan, not a long-term plan. But in our own scenario, most of them are opportunists because they want to catch up and use the money for long-term planning. That is why most of them have no direction. Like I keep saying, SMEs need to come up with business development plans. Before a company is incorporated, that company will come out with a business development plan. Before you open an account for a limited liability company you should submit a business development plan, and government will key into it and follow it up. If at any point that business does not achieve that objective, it is quietly withdrawn. By so doing, government will be able to identify those people that are performing and those that are not performing.
You see, most people move into the SME sector because they don’t have any other alternative. SMEs of course, can assist in turning around the economy, because I can assure you that if you are in SME you know exactly what you are producing and already have grown a market share in that particular business. You will be able to identify your key customers and only focus on servicing them. Before you start a business you should be able to identify the business needs, who your key customers are and satisfy them. Some of the SMEs will convince the banks dubiously or otherwise, and once they have the money, like N2 million, they disappear. They will use the money to import one big car, or go and take a title or marry more wives. This is why the Institute is insisting that every organisation should come out with a business development plan.
In other words, the problem of SMEs is not so much about the lack of access to funds, but the lack of bankable business development plan?
The first problem is that people, who are interested in SMEs, are not competent in that business. They don’t have real intentions in that business; their intention is to use the money for other objectives. Two, who are the professionals that draw the business plans? First of all, you do an environmental scanning because businesses that thrive in the south may not thrive in the north, but most of them will just go and copy a business plan thinking if you are selling pure water in Lagos, for instance, you can sell it in the north, after all north has a hot weather.
So, before you do a business plan, you must do an environmental scanning. SME is one of the best businesses to get involved in. Every family can get involved in SMEs. Families can get involved in bakeries, for instance. A group or an organisation can do it. Most SME operators are incompetent people, who just want to use it to do other things and because they know how to get funds they get the money and before you know it they channel it to other areas. If it is properly directed SME is a very good business. It has helped other economies to survive.
How do we solve some of the problems you mentioned with regards to SMEs?
All the players like the banks and government agencies involved in it must identify and do a thorough investigation of who needs these SMEs and for what purpose. There must be a proper business plan, which must be approved or authenticated by a standard professional organisation like the Institute of Business Development (IBD). Another thing about the Institute is that we have a code of conduct that if you err your certificate will be withdrawn and we are independent. If the right things are done, the result will come over sometime. But Nigerians are rather in a haste, you want to start business today and make profit tomorrow. No, lay a good foundation.
What about infrastructure, which operators complain about?
What is infrastructure? Infrastructure is equipment, roads, electricity, etc. That was why I told you that the cost of production in Nigeria is on the high side. This is because individuals are providing electricity by themselves and the cost of maintenance will definitely affect the price because it will increase their cost. For a good business you should be able to cover your cost and determine your profit. Some people who get involved in SMEs do not do a social plan. But people don’t do that. They say I am the director, I don’t even earn salary, but any money made they will just withdraw and use it as if its their own. At the end of the day the money disappears and the business suffers. So, to get round it like you said, a good plan should be made, competent hands should be sought and you must do your environmental scanning to know whether the business can survive in that environment. Its not because A is doing business and he is surviving that B must survive because A is different from B. So, you must find out that business you think you have the competence in.
The price of Nigeria’s crude in the international market has been dropping in recent times. Is this a cause for worry?
No. Why should we be worried? What about the global warming? What about the ozone layer that is cracking? You see nothing is static. For example, Nigeria had palm kernel, cocoa, groundnut pyramids why did they disappear? Is it not because of global changes when they discovered that oil can give more than what you get from those agro-allied businesses. The moment oil came everybody keyed into it and technology changed and with time or at a stage in the circle, that oil could move into another thing. All you needed is that the time you had oil, just like the dream Joseph had in the Bible when he told Egypt that it will have seven years of bumper harvest and seven years of famine, we should have been intelligent enough to use that oil to provide sustainable development. And then look at our core areas like agro-allied business, because as long as we live we need to survive, there is no human being who doesn’t eat food. So, if we had used that oil money to improve our palm oil, cocoa, groundnut and so many other resources, even if there is no oil again we will still plan and work like any other developed economy.
The United States (US) has a large storage of oil because it planned. The same for Germany and the United Kingdom (UK). In fact, I went to a place in the UK, they have an advanced farming system which looks at how the production of that farm for the next 20 years will be sustainable. But here we don’t have such plan. Let me give you another scenario. During the Tsunami in Thailand do you know that they discovered that rice production will drop in the nest five years. And what did they do? They came out with zero interest rate, encouraging farmers to go into core rice production. And Nigeria knows that rice is one of our major importations. What did we do? Here the contractors were waiting and planning how they could siphon money from the government. You see, we should key into a global thing. We should be very committed to communication. When others are planning we should equally plan. Not when others are planning we will be sleeping. When China, Indonesia and others knew that because of global crisis there was going to be a shortage in food production they started planning and then cut us off and then our rice skyrocketed. Look at how Nigeria treated the Ebola issue. Didn’t we survive it? We did. If we waited until America will come up with a particular vaccine, which we can use people would have been dying. Why can’t we look inward? This oil & gas that we are still flaring can’t we domestic it in Nigeria? How many Nigerian homes are using gas to cook? How many industries are using electricity? Nigeria has almost 200 million population, if Nigeria can sustain this by providing goods and services things will be better. We should stop looking outside; let us look inward. That was what China did. Today China’s economy is out-growing America’s economy. So we should be asking what can we use our oil to do? What can we use our gas to do? We have a large span of land, we have human resources, we have engineers, we have professionals across boards. Can’t we begin to look inward? Can we use that oil and sustain our own industries and use it and create our own economic value, that will increase the naira value so that naira can equitably compete with the dollar? But rather we are looking outside where we want to export our crude oil, they process it and send back to us at a very high margin thereby making our naira to be zero. Nigerians are gullible. These people are not interested in the development of our economy because we have the resources to turn around our economy by ourselves.
The institute is organising a business development week. Why the summit at this time?
Our Institute believes that business development is a key need of any economic development. Seeing what happens globally we thought that there is need for the Institute to come out with a business development week where we can look inward to review the business development segment of our economic system and review what impacts they made. The idea came up at the time I was at the ‘UK Week’ where a paper was presented and Nigeria was seriously criticised, that nothing good comes out of Nigeria. So, we think we should discuss our problems here in Nigeria so, we invited people who have developed to come and participate with us, support us, give us their ideas, not discussing it outside Nigeria. That is the essence of the business development week and it is an annual event, we want to be running it every year. Again, business development cuts across all economic systems. Business development is in all kinds of businesses whether profit making or no one-profit making so people should key into it and be focused in their business segment and business plan to be able to use the competent hands in driving it and then the result will come.
What should participants expect?
We have a lot of themes. The Business Development Week is going to run for three days starting from 12th to 14th November 2014. The theme of course, is ‘Business Development in Africa: Emerging issues for Strategic Action’ and the papers are going to look at the new Africa, the new frontiers, the new opportunities that we can get in Africa. As I have told you, Africa is highly endowed, Nigeria is endowed, Ghana is endowed, but let’s look at those opportunities. So, we are going to look at those opportunities. We are going to look at regional integration as a tool for Africa’s business development.
