The Small and Medium Enterprises (SMEs) are reputed to be the engine of growth of economies. In Nigeria, however, operators have many challenges. Access to funds and dearth of infrastructure are some of the challenges. The Chief Executive Officer (CEO), Lektol Insurance Broker Ltd, Adeleke Odude, says banks should do more to support SMEs. He says the fears of manufacturers over Nigeria’s signing of the African Continental Free Trade Area (AfCFTA) are real. TOBA AGBOOLA met him in Lagos.
Manufacturers have complained of the swap deal between the Federal Government and its Chinese counterpart. What is your take on this?
We have been very conservative; that is the government and the people of Nigeria. We believe that our survival rests mainly on the Western world. However, the Asians, the Chinese, the Japanese have demonstrated to the world that they have become a force to be reckoned with. It is about time we take examples from what they are doing. There is no doubt in the fact that even most of the products you find in Europe, even in their own market are manufactured from the Asian countries and now rebranded in Europe. And the reason primarily is because labour is cheaper there and they have a lot of incentives for their manufacturers, which we don’t have. The unfortunate aspect is that, as a nation, as a people, we are only a consuming nation.
The other time the minister for agriculture disclosed that about 15 conglomerates come to Nigeria on a daily bases and all of them go back empty, that is, there is nothing taken from the country. There is nothing we are showing the outside world that we are doing, and until we turn ourselves also to that side and learn one or two things from them. On the issue of limiting our foreign exchange to dollar and pounds sterling, it is a venture that is worth looking at.
As the adage says, ‘nothing ventured, nothing gained.’ So, we want a situation where the government, as it is, as an innovation, should explore the possibility, and if it fails, we will all see it, but I am optimistic that it will succeed. Whatever is going to shore up the value of our naira is what we should be looking at.
This is because the moment our naira begins to appreciate, the economy will become healthy and attractive. I can say categorically that we witnessed the days when even the naira was a stronger currency than the dollar. Today, we are having the dollar exchanging for as much as N360, whereas some years back, the naira was stronger than the dollar and we can still go back to that era.
The Asians, particularly the Chinese regardless of their population running into billions, they feed their people. Hardly do they import food. We import virtually everything; we import rice, we import sugar, we import groundnut oil.
I happened to be on a flight; a local flight to Abuja, and the snacks we were served, peanuts, salted peanuts, when I checked it, it was made in Ghana.
I told the gentleman seated beside me that we have degenerated to a level where we cannot even produce peanut with honey and sugar and make it look presentable, and well packaged. Rather, we have resorted to importing it from Ghana for consumption. And as the adage says, when you import anything, you are empowering the country where the goods are coming from and depriving your own people.
A lot of our factories are now centres for worship. We have reached the stage where most of our factories are now being converted to worship centres, and the manufacturers are complaining that their capacity in terms of production keeps reducing. What keeps the turnover to be a bit reasonable is the increase in price, not actually increase in capacity, and that is the challenge we have as a nation. That is why from our own end as business professionals, we want to explore every opportunity to bring back life into the businesses environment. There would be a centre of attraction to the outside world. The tourism aspect of our economy has been completely ignored. Last month, I was on a trip to Morocco, on a vacation and sincerely one of the income generating sectors is the desert, which is mainly for tourism, and these are things we have completely ignored and bungled.
The African Continental Free Trade Area (AfCFTA) is one of the main issues on ground. Manufacturers are saying President Munammadu Buhari should not sign it, the Nigeria Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA) and others are saying he should go ahead, what is your take on this?
Actually, that agreement would further make Nigeria a dumping ground to some countries and that is the reason the manufacturers are reluctant about it. The last time the Director-General of Manufacturers Association of Nigeria (MAN) came to give us a talk; these are part of the issues that were raised. We should be attracting investors to come here to invest and expand, not for us to open our doors; we are blessed with the population that is unimaginable. Even, in Africa, there are some countries that you need to put about 15 to 20 of them together, to be able to catch up with the population of Nigeria. So, we have the ready market here. Gradually, when companies from South Africa, such as MTN, Shoprite and Spar came in, the kind of money they make from this economy is by far more than what they are making in their own countries. This is why Spar, Shoprite started opening different branches in different places because the market population is there.
And it is about time we continued to protect our own manufacturers; we already have our challenges, which are the things that are making our cost of production to be extremely on the high side. So, what we should address are those challenges, the first of which is power supply, then the infrastructure gap that that needed to bridged that is making it difficult. By the time these goods come in, because there is incentives from government in terms of tax holidays and things like that which are are not there are things that should encourage production locally. By the time we encourage production, we will have enough for our market to use, and that will save us the foreign exchange that we use to import all these goods. What they are afraid of with the agreement is that they do not want a situation where, they would turn Nigeria into another dumping ground to bring in their own goods, whereas we are supposed to be protecting our own industries. With this, Nigeria will no doubt become an exporting country, and not an import-oriented country.
How will you rate the activities of the banks in the area of supporting Small Medium Enterprises (SMEs).
Candidly speaking, the banks have failed us. The banks keep declaring billions of naira as profit quarterly, yearly and the impact is not felt in the economy. The impact is not felt because there is no economy that will grow on an interest rate of between 25 and 30 per cent. If you look at other advanced countries such as Europe, America, they keep their interest rate at single digit. So, a situation whereby we have interest rate hovering at between 25 and 30 per cent, is not in the interest of everybody because the economy cannot grow. And the reason is because what the banks are more interested in is short term fund for individuals who have stolen money and kept with them. So with that, they cannot give out funds at reasonable interest rate. We are supposed to go to a situation where the unemployed, the youths will have easy access loan with a reasonable interest rate. As I said, we cannot build an economy on such interest rate; we have now and that is the reason why even the real estate is failing. We are supposed to be looking at how to empower the SMEs. For instance, you will find out that the Asset Managment Corporation of Nigeria (AMCON) published the names of the defaulters of loan recently. It was discovered that those who are owing banks are just 2.5 per cent of the total population. This means that banks will rather deal with the 2.5 per cent rather than spreading the money so that everybody can benefit, knowing full well that those 2.5 per cent will default. They failed to realise that it is when they spread the funds that more individuals, businesses will be able to pay taxes. It is because we are dependent on oil and what comes out of oil. That is the reason why government does not bother if individuals are empowered. But in a situation whereby government generates most of its income from taxes, the attitude of government will be to encourage enterprises, SMEs at every level. When everybody is busy with one thing or the other, more people will pay taxes and this will increase government revenue. This will create employment and crime rate will reduce. But as it is, we are sitting on a keg of gun powder that can explode anytime.
We are in the third quarter of the year. How will you rate the economy in the last six months?
Looking at the economy from the last six months, I would first and foremost say from the perspective of the exchange rate between naira and dollar that there is a reasonable level of stability. But apart from that, the government itself is a major spender. Again, where we have a situation where the budget was not signed until almost in the first half of the year cannot be in the best interest of the economy and the people of the country.
These are routine that are supposed to be normal. We all know that budget is from January to December; and every input into the budget will have to come in before the end of the year, and the National Assembly can be mandated to meet and approve the budget. In a situation where capital budget are being funded from the first quarter to the third quarter makes the economy to be unmanageable rather than rejuvenated. These are areas government must look into, no matter what it takes. Even companies are compelled to submit their performance in terms of their audited accounts to the stakeholders, both the shareholders the same way the government has the duty to the citizens.
There is no reason why our budget cannot be passed, say maximum in the second month of the year, so that we would have 10 months to implement whatever is contained therein. These are things that are affecting the economy and a situation where the legislative arm and the executive, keep blackmailing each other as it is actually happening now, does not augur well for the economy. A serious government should know this.
What we should be looking at is what will benefit the citizens, not the legislative or the executive. Both the legislative and the executive are there to serve the people, not to use the people to achieve their own selfish interest, and that is precisely what we are experiencing now as a nation. It is only in Nigeria that the political bodies, groups and parties do not have ideologies and guidelines that they are following. This is the reason it is so easy in America. In the American system of government, we don’t see a republican becoming a democrat, in the British system of government, you don’t see a conservative overnight becoming a labour person or vice versa, but here we have people who are in People’s Democratic Party (PDP), who ran to All Progressives Congress (APC) because they are not meeting or achieving their personal objectives. We are supposed to rise above this as a nation, it shows recklessness and carelessness as a people and the outside world is looking at us and laughing at us.
You have spoken about the economy, 2019 election is very close. How do you see the economy between now and then?
Personally, I am worried particularly when President Muhammadu Buhari sometime ago sent a substantial supplementary budget to the legislature for approval, so that almost one quarter of the budget would be given to the Independent National Electoral Commission (INEC) to hold elections. It is a subject of concern in the sense that, we all witnessed what happened in the United Kingdom (UK). The government changed, there was no expenditure from the government. The same thing in America, we witnessed the election that brought Donald Trump in, it was sponsored mainly by individuals who contributed to his campaign. A situation where a quarter of the budget is going to finance an election, is already telling us that 2019 is going to be a depressed economic year because the money we are talking about that they want to spend will end up in the pockets of individuals. We are all aware of the revelations that came out, how substantial sums of money was given to individuals unaccounted for, in the last election in 2015. What we are going to have, if we are not careful, is a repetition of that and as David Cameron said in one of his comments, when he was Prime Minister of Britain, that the kind of money that left the economy of Nigeria over the years, if something like that was spent on Britain, the country could have been better off.