Highlights From The SME Non-Oil Export Workshop by ASSETS & African Hub
A while ago we shared with you the details about an upcoming SME Non-Oil Export Workshop, Themed Dollars and Sense. Dollars and Sense! Repositioning Nigerian SMEs As Catalysts to Achieve Rapid, Sustainable Growth in the Non-oil Export Sector.
The workshop was organised by African Sustainable SME Export Trade Solutions (ASSETS) in partnership with African Hub International. This event was coordinated by Ms Shade Bembatoum-Young, the CEO of African Sustainable SME Export Trade Solutions (ASSETS).
If you missed the opportunity to participate in this enlightening workshop, you can read the highlights as written by Siaka Momoh on Real Sector Now, below…
When small groups come together to discuss problems confronting sectors of the economy, some people write off such sittings as opportunities for few elites to unwind over tea, coffee and lunch. This, to be candid, is not true.
For some of us who have had the privileged of attending and participating in such forums over the last three decades, we know that such gatherings mill ideas, mill solutions that are very useful as inputs to governance, to production processes, to job creation and ultimately add value to the nation’s economy.
This played out well on Thursday in Lagos at the African Sustainable Export Solutions (ASSETS)/African Hub’s Dollars & Sense workshop held in Ikeja to shore up SMEs in the non-oil export sector of the nation’s economy. To kick start my review of discussions at the workshop, let us do some benchmarking with the following key killing hurdles in the SME sector:
- Lack of appreciation by the Government about SMEs’ role and contribution;
- Difficult access to bank credit highly bureaucratic;
- Lack of transparency;
- High transaction cost;
- Lack of institutional support;
First in doing this, I am emboldened by the fact that small enterprises are vital to the health of the economy. I draw on the following to corroborate my argument:
SMEs in the African context
The significance of SMEs in the African context cannot be overplayed. A myriad of factors underscore this claim. The factors include the following: SMEs are generally less capital-intensive and more labour-intensive; SMEs are best suited for countries of Africa and Asia and most of the developing world having abundant supply of low-cost manpower and bountiful natural resources; they provide large scale employment, ensure equitable distribution of income and facilitate effective mobilization of resources of capital and skills which would otherwise remain unutilized, particularly in rural and backward areas.
SMEs in Asia and India
Moreover, some developing countries in Asia and India have already established a niche in SME development as a strategy and provide excellent support in product development, R&D, financial instruments, infrastructure, marketing and export development.
Consequently, India is fast emerging as a global hub in manufacturing section as well as for labour-intensive knowledge-oriented business. We therefore have no reason to fold our arms and watch the heart of our economy bleed, one caused by the killing hurdles in question listed above.
Stakeholders and NAFDAC
Let us take one of the stakeholders and NAFDAC‘s case study. The stakeholder in question packages raw and unrefined shea butter 100 per cent from a couple of women’s cooperative from Nigeria and Ghana (100 percent West African local content).
The company has to date, impacted positively on women who have been given shea-butter supplies responsibilities. How? Before their involvement with the company, many of them struggled to get by and often had to result to backbreaking labour in order to supplement their income from growing subsistence crops like millet and groundnut.”
The shea-butter company meets the criteria for diversification 100 per cent. It is not an import substitution categorised manufacturing company – it does not need to bring in any raw material from Europe, Asia or the Americas. But it has the local environment thorn on its neck. It has the NAFDAC troubling problem to contend with.
The company raised the subject and NAFDAC was on hand to explain. How did it go? The spokesperson for NAFDAC spoke generally about SMEs who are scared to come to NAFDAC, who have incomplete documentation, who are non-compliant with labelling requirements. Then there was the talk about fees payable to NAFDAC by product manufacturers.
Ease of starting business/fees
According to NAFDAC, for Food local, it is N52, 500; for Imported food – N1, 042,200; for Cosmetics – N73, 750; for Imported cosmetics – N1, 063,500; for ECOWAS – N265, 781.
Good enough the fees structure given here is designed to favour local production. But the prices listed are very far from the truth said the shea-butter company and some other stakeholders who claimed they paid as much as N1.5 million.
NAFDAC’s figures, some stakeholders claim, were ridiculously at variance with the fortune they pay to this government agency. This writer corroborated the stakeholders claim with the case of a stakeholder who packages table water in Oriade Local Government Area of Lagos State.
We therefore need not go far to find out why Nigeria scores poorly yearly in the World Ease of Doing Business Ranking. In 2015 and 2016 Nigeria ranked 170 and 169 respectively out of 189 nations ranked.
For Starting a Business, which the issue under discussion properly falls under, Nigeria ranked 131 and 139 in 2015 and 2016 respectively out of 189 nations ranked.
And what was NAFDAC’s reaction? Its explanation was that middlemen that manufacturers go through are the problem.
The straight point is that some bad eggs in NAFDAC hire middlemen to rip-off manufacturers. “This is the reason why the ‘Expedite Processes Unit’ has been created in the Director’s Office in Abuja,” according to NAFDAC’s representative at the event.
Need for house cleaning
It is clear here that NAFDAC needs to do some house cleaning. If this is the case with NAFDAC, will it not be right to infer that similar occurrence can be found in other government agencies that manufacturers deal with? This is a question for you to ponder.
In any way, we can see clearly that what we have here ties up clearly with some of the hurdles listed earlier on: Lack of transparency; High transaction cost; Lack of institutional support. Thorn in the flesh of non-oil export products manufacturers. Isn’t it?
Bolanle Oyedoyin, PhD, who spoke for Federal Institute of Industrial Research Oshodi (FIIRO) said the institute was established in 1956 to assist in accelerating the industrialization of Nigeria economy through research and development into food processing agro-allied, textiles, pulp and paper, ceramic and industrial raw materials, design and fabrication of machinery and equipment.
She gave a long list of Nigerian food and cash crop products that could be processed and exported. And this reminds one of AGOA opportunity which is begging for Nigeria’s patronage. And the singsong about diversification, you would want to remind me.
NEXIM and funding
NEXIM gave some good hope. Tayo Omidiji Head, Strategic Planning at Nigerian Export-Import Bank (NEXIM) spoke of N500 billion Non-Oil Export Stimulation Facility (ESF) aimed at boosting non-oil exports in Nigeria. The Central Bank of Nigeria (CBN) launched the facility not too long ago in partnership with NEXIM after concluding that inadequate financing was responsible for the drop in non-oil export revenues from $10.53 billion in 2014 to $4.39 billion in 2015.
According to the CBN guidelines, the ESF will be implemented via a N500 billion debenture to be issued by NEXIM Bank in line with Section 31 of the CBN Act. NEXIM Bank shall be responsible for the day-to-day administration of the Facility and rendition of periodic reports on the performance of ESF to CBN. The CBN said the ESF will grant loans with a tenor of up to three years at a maximum “all-in” interest rate of 7.5 percent while loans over three years will have a maximum “all-in” interest rate of 9 percent.
No loan shall exceed 70 percent of the total cost of the project and transactions shall be subject to a maximum of N5 billion. The ESF will have a tenor of up to 10 years and shall not exceed December 28, 2025, the apex bank said.
Eligible transactions that shall qualify for funding under the ESF are: (i) Export of goods wholly or partly processed or manufactured in Nigeria, (ii) Export of commodities and services, which are permissible and excluded under existing export prohibition list, (iii) Imports of plant & machinery, spare parts and packaging materials, required for export oriented production that cannot be produced locally, and (iv) Export value chain support services such as transportation, warehousing and quality assurance infrastructure.
Omidiji also spoke of N50 billion Export Credit Rediscounting and Refinancing Facilities (RRF) to support banks in their provision of pre- and post-shipment finance to exporters. The RRF will be implemented via a N50 billion debenture to be issued by NEXIM in line with Section 31 of CBN Act. These interventions will help to take care of ‘Difficult access to bank credit highly bureaucratic’; and ‘High transaction cost’ in the list of challenges SMEs face, if honestly managed.