THE Development Bank of Nigeria, DBN, first annual lecture series held recently in Abuja showcased icons of its Micro Small and Medium Enterprises program thereby raising hopes for the sector struggling with finance.
With the theme, “Surviving to Thriving: MSMEs as the Key to Unlocking Inclusive Growth in Africa,” the event which held at the Congress Hall of Transcorp Hilton, was intended as a platform for robust exchange of ideas to unveil the challenges and opportunities that exist in the Nigerian economy for the growth and development of the MSMEs.
The bank used the opportunity to showcase those who have made a success of their policies of lifting MSMEs from the valley into the limelight while equipping them to compete with multinationals. Two such were Mrs. Yemisi Iranloye of Psaltry International and Amal Hassan of Outcome Global who enumerated the challenges they faced while starting their various projects and the inspiring story of how they were able to surmount the hard times with the lifeline provided by DBN.
According to her story, Mrs. Iranloye in her farming and agro-allied processing business, the absence of power, road, water, and other primary infrastructure, as well as limited credit facilities were a big setback, but she overcame these challenges by being resolute before help came.
“ I was ready to build on two major resources available to me which were the land and people.”
Iranloye said she started with about 100 smallholder farmers but the number is now about 3000 and by supplying crops to factories, the farmers now earn over N2m annually.
Further, in her family team, women were less than 10 percent at the beginning of operations however this number has grown close to 40 percent and today, the community in South-West part of Nigeria where her business is located has benefitted from the growth and expansion which the company has experienced over the years.
Leading Nigerian technopreneur of Outsource Global, Amal Hassan eloquently explained to the audience on how she started her first ICT business in 2003 in Kano, providing
IT training to young Nigerians especially women. But in 2013, she changed her strategy to establish Outsource Global, an outsource Call Centre Solution. The business failed four times but she persevered.
Today, she said Outsource Global which is just three years old had over 650 employees, most of them outsourced to the US market with ongoing plans to expand to the UK and Japan.
The company according to her emerged as the leading Nigerian Contact Centre provider, servicing the international market. Amal emphasized that Nigeria has the best talent and every skill set required to service the global market.
For Ndidi Nwuneli who has been in the MSME space for almost 20 years, started her support for MSMEs with coordinating business plan competitions and then founding LEAP Africa, an Enterprise Development Centre in 2002.
One of the things that propelled her to establish LEAP Africa, according to her, was that most companies folded up with the demise of their founders, a phenomenon which was pronounced in Nigeria.
ACCE Foods, an agro-processing company that sources spices, herbs, grains, and cereals from about 10,000 farmers, which she co-founded was started to address the crisis of imports in the country.
From her experience in starting this business, Ndidi explained eloquently what MSMEs needed to thrive is an enabling policy environment.
Professor Akpan Hogan Ekpo, one of the discussants during the lecture, noted that because the MSMEs operate within the wider economy, they were disproportionately affected by economic shocks as it affected their savings, amongst other things.
He added that unfavorable microeconomic indices like higher employment rate, double-digit inflation, high-interest rate, as well as the country’s unimpressive ranking in the misery index, pose big problems for MSMEs from reaching their optimum level.
On the other hand, at the macro level, he identified problems of insecurity in the country as a major problem for the MSMEs. He said a combination of sound monetary and fiscal policies will overtime, improve and ensure a more conducive operating environment for MSMEs in the country.
Peter Bankole in his submission said there was more to MSMEs development than financing. He tagged the constraints seen in the MSMEs space with an acronym; MISFIT. ‘M’ he says stands for lack of access to Market, I for infrastructure, S for support services, F for financing, I for information and T for technology.
-*The panelists however on the issue of longer tenor funding for MSMEs and how primary finance institutions could build trust with MSMEs. They were of the opinion that a lot of MSMEs still could not access credit despite the intervention of DBN.
While Bankole identified more collaboration between the banks and MSMEs, Prof. Akpan said more efforts at creating awareness of the existence of the DBN are very important.
Mrs. Nwuneli suggested the need to rebuild trust among all partners and to do this, she said that financial institutions should partner with non-profits and enterprise development centers who were better placed to recommend credit-worthy MSMEs to the banks.
The Managing Director and Chief Executive Officer, of DBN Mr. Tony Okpanachi expressed the Bank’s commitment to ensure that Micro, Small and Medium Enterprises (MSMEs) are adequately empowered to contribute effectively to the Gross Domestic Product (GDP) of the nation.
He explained that MSMEs were collective, the largest employers of labor in many low-income countries including Nigeria, yet their viability and growth was restricted by lack of access to long-term debt capital.
To give credence to his point, Okpanachi cited statistics from the Small and Medium Enterprises Development Agency (SMEDAN) and the National Bureau of Statistics (NBS), which revealed that there are about 41.5 million MSMEs in Nigeria which collectively contributed well over 50 percent of Nigeria’s GDP.
He stated that statistics had revealed that across the continent and many global economies, MSMEs are the bedrock of economic growth and development because of the critical role they play in accelerating economic transformation and industrialization.
The DBN Chairman, Dr. Shehu Yahaya in his address further noted that DBN, SMEDAN, the Central Bank of Nigeria (CBN) and others identified access to finance as a major constraint for MSMEs.
“Also, commercial bank lending to MSMEs, which remained subdued had further contracted from 48.8% in 1992, down to 5% by 2015, he added.
He acknowledged the efforts of the current administration through the Economic and Growth Plan (ERGP) and the implementation of the Social Investment Programmes, the agricultural production and value addition programs to address a shortage of jobs and the issue of poverty. These he noted, need to be substantially expanded and sustained.
He explained that since DBN commenced operations, the Bank had lent more than N70bn and impacted on more than 50,000 MSMEs.
Dr. Yahaya, however, thanked the equity partners of the Bank led by the Federal Government of Nigeria, the AfDB and EIB; with support from the World Bank, AFD and KFW, who provided loans, grants, and technical support to DBN.
The representative of the Federal Government, the Permanent Secretary, Federal Ministry of Finance, Dr. Mahmoud Isa-Dutse said human development and empowerment play an immense role in the success or failure of any nation.
He added that most of the problems facing the continent could be traced directly to lack of investment in human capital development and which had been neglected for decades.
He said that Nigeria is not left out as it has the potential to become a major player in the global economy by virtue of its human and natural resource endowments. However, this potential according to him has remained relatively untapped over the years.
Isa-Dutse also added that MSMEs are arguably the largest employer of labour in Nigeria, most of which operated with very minimal government intervention.
The Permanent Secretary however noted that the narrative was changing because, in many developed nations across the world, governments now recognize the emerging power of MSMEs and go further to assist them with favorable policies, plans and programmes to enable them to succeed.
“Since the inception of the President Muhammadu Buhari administration, the government has recognized the need to pay the utmost attention to MSMEs because they account for almost 50 percent of Nigeria’s GDP.
He explained that the present administration has demonstrated the willingness to develop this segment, by either enacting laws or setting up government agencies and institutions to address the challenges faced by the various stakeholders in this critical segment of the economy.
The Ministry of Finance scribe also stressed that DBN and other Development Finance Institutions are mandated to cater specifically for sustainable growth in various productive sectors of the economy.
“The implementation of which is incorporated in the Economic Recovery and Growth Plan,” he added.
In the keynote lecture titled “Financing Africa’s Inclusive Economic Transformation: The Role of National Development Banks”, Dr. Donald Kaberuka, the African Union High Representative for the Peace Fund and Former President and Chairman of the Board, African Development Bank, ADB, explained that as a strong supporter of National Development Banks, he was pleased to learn of the progress that DBN was making in financing the MSME segment in Nigeria.
He provided the audience a historical context of development on the African continent from the 1980s through the 1990s when the prospects of the continent looked dire and Africa was described as a “hopeless continent.”
However, Kaberuka said the new millennium saw “Africa rising” despite the challenges inherent in the African continent which include but not limited to the overemphasis on commodities and poor diversification, poor infrastructure, multiple taxations and absence of quality education.
Dr. Kaberuka said that for Africa to rise further, four things were fundamental and this according to him include;
-rebuilding economic buffers against external and internal shocks
-sustaining economic growth above the population increase
-going beyond economic transformation, moving up the global value chains and creating jobs,
-addressing the issue of inequalities, inclusion and leaving no one behind
-improving quality education and
-ensuring inclusive growth within the SME space.
On the African Continental Free Trade Area (AfCFTA), he commended the government of Nigeria for signing on to the agreement after taking the time to consult internally.
He also applauded Africa for taking a bold step to break down the barriers to trade, at a time when most of the rich countries like the United States of America were putting up more trade barriers.
He added that for manufactured goods crossing the border, Nigerian banks and insurance companies stand to benefit immensely from the AfCFTA.
He, however, cautioned countries to ensure that they do not make trade difficult by placing tariffs restrictions and other delays coupled with cumbersome documentation challenges.
Presenting the lead paper, Vice-President, Country Operations, Islamic Development Bank, IDB, Dr. Mansur Muhtar addressed the role of MSME, key constraints and development challenges, as well as opportunities for MSMEs since 2015.
He said the year 2015 was significant because Nigeria joined other world leaders in adopting the Sustainable Development Goals (SDGs) thereby joining the call to end poverty. The year marked a major transition from the Millennium Development Goals (MDGs) to SDGs and it had been widely acknowledged that MSMEs have a leading role to play in achieving the SDGs and taking Nigeria to greater heights.
MSMEs, Dr. Muhtar explained, are major growth drivers because they create jobs and promote poverty alleviation.
“They are also key drivers of innovation and providers of public good”, he said
According to him, SDGs target of ending poverty, zero hunger, good health and wellbeing, gender equality, inclusive social and economic employment, reducing income inequality, all make MSME worthy of specific focus.
He lamented why despite these potentials, MSMEs were yet to play their key role in Nigeria and other emerging markets.
He explained that the single biggest constraint to MSMEs establishment and growth was limited access to finance.
According to him; “This is largely because of the perceived high risk and transaction costs that made it difficult for commercial banks to service this segment.”
Other constraints identified by him are the infrastructure deficit particularly electricity, road network, and water supply estimated at USD$131 billion annually in Africa, poor enabling environment, and limited manpower and capacity needed by MSMEs.
Dr. Muhtar prescribed the development of supportive legal or regulatory framework, strengthening financial information infrastructure and effective government support mechanism as critical to the development of MSMEs.
He also added that concerted effort was needed to broaden the range of financing instruments in the country.
To achieve this, Dr. Muhtar observed that the Nigerian operating environment had relied too much on traditional collateral-based lending adding that there were a lot of possibilities like equity funds in the market that could be secured to increase the pool of resources available to MSMEs.
According to him: “We are not doing enough of that and other financing opportunities, such as tapping into crowdfunding facilities.”
He advocated Islamic finance as a tool for increasing the flow of resources to SMEs, he posited that working with IDB, he had seen the potential in many countries.
Other imperatives highlighted in his paper included addressing the capacity building of relevant stakeholders, and as a matter of urgency, and integration of MSMEs into value chains to get the expertise needed to foster growth.
Dr. Muhtar asserted that the building blocks for MSME development are security, social inclusion, non-market distorting policy, capacity, human development, partnership, and good governance. “the ability to leverage and partner with private sector or other development institutions, as well as the ability to monitor, track and adapt to the ever-changing business environment, will be a key determinant to achieving inclusive growth in Nigeria and Africa by extension.”
The panel of discussants that analysed the presentations were made up of five Nigerians who have distinguished themselves in their chosen fields both at home and abroad including three women whose entrepreneurial prowess and business acumen continued to set them apart, as leading business leaders in Nigeria.