The Nation Newspaper

Tag: SMEs’

  • Fed Govt urged to support SMEs

    Fed Govt urged to support SMEs

    A FORMER President of the Port Harcourt Chamber of Commerce, Industries, Mines and Agriculture, Mr Hyke Ochia, has urged the Federal Government to develop the Small and Medium Scale Enterprises (SMEs) to reduce unemployment in the country.

    Speaking in Port Harcourt, the Rivers State capital, he said the government should initiate programmes that would promote private-public partnership for the benefit of Nigerians.

    ‘’Everything lies on the government, even though the government is not supposed to provide jobs, it is supposed to provide the enabling environment for jobs to be created.

    ‘’When they do that, they create room for businesses to spring up because in most developed economies, the majority of the employers are the medium and small scale industries.

    ‘’The large scale industries are limited. They can employ, may be one million people and it stops there, they cannot go beyond that. But when you look at the medium and small scale industries, they could multiply themselves in various fields and when these ones are not thriving, obviously, you will have that gap of unemployment.’’

     

  • More loans for SMEs, says CBN

    SMALL and Medium Scale Enterprises (SMEs) will get more loans after the Central Bank of Nigeria (CBN) reduces the cost of banking services by 30 per cent, the Head, Shared Services, CBN, Mr Chidi Umeano, has said.

    He told The Nation that efforts were on to ensure that banks achieved 30 per cent cost reduction, and further lend to SMEs, among others in the economy.

    CBN, he said, has identified cost drivers in the industry, and the possibility of reducing them to aid lending.

    “Banks are incurring huge expenses in cash handling, he said, adding that they have in the process transferred the cost on loans seekers,” he said.

    He said CBN introduced cash-less policy to reduce the cost of banking services, and further increase accessibility to loans. According to him, there would be more lending opportunities for SMEs, as the cash-less policy takes off fully in the country.

    Umeano said CBN had met SME operators in Lagos, to fashion out ways of using the cash-less programme to enhance their operations.

    According to him, there would be more lending opportunities for SMEs, as the cashless policy takes full effect in the country.

    He said: “The SMEs owners have been accommodated well in the cashless net. They are part of our plans. We have explained the value chains in the cashless initiative to them, the use of Point of Sale (PoS) providers, and what they need to do access facilities from the banks.

    “We believe that there will be increase access to facility and service levels across the industry, once banks have reduced their operational cost by 30 per cent. The motive for the cashless policy is to reduce cost of banking services (that is the cost of credit and the likes in the economy). This will increase lending opportunities for informal sector operators, that formed 70 per cent of the country’s population.”

    The cash-less guidelines, he said, had been structured in such way that SME owners are protected.

    CBN, he said, has provided card acceptance guidelines that accommodate all operators in the financial chains.

    Manufacturers Association of Nigeria (MAN), president Alhaji Bashir Borodo has praised the CBN initiative. He said the decision to make banks to lend more to SMEs is a good one capable of stimulating the economy’s growth.

    He described funding as the major problem facing SMEs, adding that their potentials would be galvanised when they have access to funds.

    Borodo said CBN’s reforms agenda “greatly” impacted on the economy, stressing that the apex bank has assisted SME operators via granting them N200 billion loans two years ago.

    A teacher at the Lagos Business School, Dr Austin Nweze, said SME operators had long been denied access to loan. Nweze said it would be good if banks are able to increase funding to SME owners. He said the problem facing banks is the capacity to do what is going to benefit the economy.

     

  • Killing SMEs

    Killing SMEs

    •The CBN governor should refrain from statements that do not nurture the economy

    The hope of thriving small and medium enterprises (SMEs) in the country seems to be hanging in the air. For decades, the SMEs have struggled for meaningful existence to no avail. Successive administrations have only made rhetoric of their commitment to the scheme, despite the fact that hundreds of millions of naira get budgeted for the purpose annually.

    The current administration, like its predecessors, has mouthed its commitment to salvage the ailing SMEs. Yet, those small-scale businesses cannot access money budgeted for them as loans by the banks. And there seems not to be any light at the end of the tunnel for them. At the recent Bankers’ Committee Retreat, Sanusi Lamido Sanusi, Governor of the Central Bank of Nigeria (CBN), rather than come up with the panacea to the problems of the SMEs further compounded the situation by reeling out excuses justifying government’s inability to revive them.

    Sanusi said: “…Small and Medium Enterprises (SMEs) only thrive in an environment that is conducive. If you want vibrant SMEs that can borrow from banks, we must fix the power problem, we must fix the agricultural value chain problem. Banks cannot continue to lend to SMEs that are not profitable because they have to continue to run on generators and buy diesel, with bad roads and insecurity. So, the environment has to be fixed and that would encourage banks to lend to SMEs.”

    With the numerous hurdles that Sanusi has placed at the doorstep of the SMEs, they look beyond redemption simply because those impediments have over time been intractable, even when they are not insurmountable. Yet, the SMEs in well-focused climes ought to, ordinarily, be the soul of the economy. But here, the government does not easily realise their significance and this is hurting the country’s economy. The SMEs are found wanting in the country because most of them cannot access loans for their growth due to institutional impediments. Sanusi worsened matters by justifying banks’ refusal to do business with them, saying that the SMEs are not vibrant due to the unfriendly environment they operate in.

    Sanusi cannot say without equivocation that the country is at the moment enjoying financial stability. He was appointed head of the nation’s apex bank to provide workable and beneficial monetary policy and not to dabble into micro-economic matters that are ultra vires his brief. Even though he is a member of the Economic Team of the current government, he should quietly make his opinions known to the team at its meetings with President Goodluck Jonathan rather than consistently make statements that are capable of inflaming an already fragile polity.

    Mallam Sanusi should realise that he was not appointed to dissect problems; he should rather proffer solutions that are intra vires his powers on how to make the SMEs and other monetary creations work for the betterment of the economy. For example, we expect him to come up with a sustainable single digit bank lending rate; he should further restore sanity into the banks. The CBN governor should find out why the banks are not giving out loans to SMEs which is due largely to their demands for unattainable collateral while they would gleefully give out such to shady businessmen.

    We want to know why banks prefer to lose money to the CBN than lend out such to farmers in the country. What the nation demands of Sanusi is not combustible statements but realistic actions that can inspire stability of her financial system.

     

  • ‘Why banks are running away from SMEs’

    ‘Why banks are running away from SMEs’

    Small and Medium Enterprises (SMEs) are expected to be the soul of the economy. But they have a problem; many of them cannot access loan for their growth. The banks too are shying away from doing business with them. Why? It is because they are not vibrant and are operating in an unconducive environment, says Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi in this interview with reporters on the sidelines of the Bankers’ Committee retreat in Calabar, Cross River State. Group Business Editor AYODELE AMINU was there.

     

    What will be the focus of the Bankers’ Committee in 2013?

    Our focus in 2013 remains the implementation of the financial inclusion strategy, continuation of the agricultural lending programme, moving towards the gas to power plan, privatisation of power, issues around policies and principles. We still have a long way to go, but we are proud of the work we have done in the last four years. I do hope that this industry will produce the generation of central bank and bank chief executive officers that played a catalyst role in the development of the economy. The Bankers’ Committee has said that our focus would be on financial inclusion across the country. But there will be a special focus on Borno State on financial inclusion. The Bankers’ Committee will partner with the government of Borno on financial inclusion in that state. Now, with the conclusion of the power privatisation there are issues. The first is advising the government on funding of power transmission. One thing that is clear to us and what we are going to advocate is that all the proceeds from the sale of power assets should actually be dedicated to improvement in power transmission system. Because there is a huge financial requirement for power transmission development and if $2.3 billion is dedicated to that, it covers a significant part of that cost. Now the announcement of that kind of decision to be taken by the Presidency and the National Assembly and not the Bankers’ Committee, would create the confidence that private investors require to invest in the integrated plant because they know that the big risk in the power value chain now is transmission. A lot of funding is required. So fixing transmission is one, ensuring that we have funding for capital expenditure for generating plants that have just been set up is also key. The committee is working on financing and advising the sector. On the agricultural sector, we will continue with our engagements with the states and continue to address the value chain process. There are outstanding issues and they need to be addressed. We need to improve the engagement with the Federal Ministry of Agriculture and our resolve is to integrate our silos so that all stakeholders can get more value chains to operate. We shall continue with the work which we have started on the modernisation of the payment system, governance, competency, training and financing.

    How does your intervention in the agric sector affect rural farmers?

    The whole idea of the intervention in the agric sector through Nigeria Incentive Based Risk Sharing for Agricultural Lending (NIRSAL) is to address some of those things that have affected the growth of the sector. One of those things that we have tried to do is to work with states and put those farmers into cooperatives so that they are able to raise silos as a cooperative. As a cooperative, they are able to get training, extension services, buy seeds and negotiate for fertilisers. Then, you go to Kagawa, which is 40 kilometres from Kano, you will see how we and the state have put together, tomato farmers to get improved varieties and seeds. Now, we are looking at setting up a processing plant, which will produce tomato and process it on-site. They are producing twice a year now, instead of once with irrigation. We give them seeds, fertilisers and they are able to access financing. But we must remember that agriculture and lending to the real sector is a journey and not a destination. Two years ago, we set a target of getting bank lending to 10 per cent of the loan book of banks by 2017. As at that time, 2011, we were at 1.5 per cent. But today, we are at 3.58 per cent. So, as we continue to implement these reforms, we should get to our target by 2017.

    What is the Bankers’ Committee doing to ensure that lending rate is reduced to support the growth of SMEs and what would be the contribution committee’s to assist flood victims?

    As far as the Committee is concerned, remember that small and medium enterprises (SMEs) only thrive in an environment that is conducive. If you want vibrant SMEs that can borrow from banks, we must fix the power problem, we must fix the agricultural value chain problem. Banks cannot continue to lend to SMEs that are not profitable because they have to continue to run on generators and buy diesel, with bad roads and insecurity. So the environment has to be fixed and that would encourage banks to lend to SMEs. That is why we said there should be focus on power and we should get the reform ongoing. A lot of work has been done on power reform and the funds from banks. Take funding for example, the reform would not have happened if the Central Bank did not provide the funding for the advisory role. So, the Central Bank paid for all the work that was done to privatise power by the Bureau of Public Enterprises (BPE). The objective is to get the power reform completed, and if that is done, then power supply would improve, cost of production would come down, industrial capacity would increase and SMEs would be able to borrow and service their debts. On the rate of interest rate, it is not a Bankers’ Committee issue. Rates of interest are reflective of rates of inflation, therefore there is need to have stability in the system. As we begin to move to a low inflation environment, rates of interest would continue to drop and make it easier for banks to provide financing for the real sector. On the flood, the Bankers’ Committee has agreed that we would support. The CBN would put money into that pool, all the banks would put money into that pool and we would give the funds to the Flood Relief Committee that was set up by the President.

    What is the Bankers’ Committee’s level of commitment to the stability of the financial system?

    We affirm our commitment to a stable financial system that contributes to economic development of the country. We commend President Goodluck Jonathan’s economic reform agenda and associate with the objective of growing the Nigerian economy and creating jobs. The Central Bank has taken proactive actions to ensure that the financial system remains focused and committed to the goals of economic development and sustainability. Effective collaboration and partnership across government, banks, private sector and key stakeholders is critical to achieve economic goals and objectives. We reaffirm our aspirations for the transformation of the power, agriculture and oil and gas sectors of the economy, increasing access to finance for the under-banked and unbanked, and to the principles of sustainable banking. To consolidate our progress and achievements to date and address issues that remain, the Bankers’ Committee will continue deliberate advocacy and partnering with the economic team to implement the economic reform agenda to grow the economy and create jobs. We have defined clear objectives and targets for 2013, agreed on the results and outcomes we expect to achieve and assigned responsibilities for implementation. We will continuously monitor our progress on implementation as well as the impact of our actions on Nigeria’s economic development goals and objectives.

    What role is the Bankers’ Committee playing in the development of the economy?

    The Bankers’ Committee is committed to a lead role as catalyst for economic development, improving access to finance by the unbanked and under-banked and growth of the real sector.

    The Committee has focused on the Power, Agriculture and Transport Infrastructure sectors for driving growth and identified opportunities for financial system intervention in the transformation of these critical sectors of the economy.

    Through collaboration with the government, the banking community and real sector stakeholders, the Bankers’ Committee programmes and initiatives have contributed to tangible improvements in the enabling environment and private sector funding for the power and agriculture sectors.

    Progress has been made on several fronts. For example, lending to the agriculture sector has increased. The banks’ lending to agriculture has increased from 1.5per cent of total industry portfolio in 2009 to 3.5per cent in 2012.

    We have established the NIRSAL to encourage the growth of formal credit for the agriculture value chain. We have continued effective advocacy that has led to significant progress in the reform of key sectors of the economy including power, agriculture and oil and gas. Also, the financial excluded population has reduced from 46 per cent of adults in 2010 to 38.7 per cent in 2012.

    Significant capacity is also being built within the financial services sector in the areas of project finance and agriculture lending to support long term finance and agricultural lending.

    The 2012 Bankers’ Committee Retreat focused on strategies to consolidate and improve on the gains we have made in real sector development, determine further opportunities for financial system intervention as well as required actions to sustain and improve stability of Nigeria’s Financial System.