Dr. Dikko Umaru Radda, director general/chief executive officer, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), oversees an agency saddled with the responsibility of promoting the development of the MSMEs sector of the Nigerian economy. The agency which he heads serves as a one-stop shop for the development of micro, small and medium scale enterprises – an economic sector that is the bedrock of development. In his interview with Tokunbo Adedoja, he speaks on the challenges confronting MSMEs, what the agency has been doing to help surmount these challenges and how MSMEs could help drive the job creation agenda of government
It will be a year since you assumed office, how has it been managing such a strategic agency responsible for small and medium enterprises?
I have faced many challenges but I am equal to the task. Basically the major challenges that I have is because most of the people that I knew, you know before I assumed this office I was at the National Headquarters of the APC, I was also the Chief of Staff to the Governor (Katsina), as a result of those offices that I have held before now I have links with a lot of people; so once I was appointed as the DG of SMEDAN – Small and Medium Enterprise Development Agency of Nigeria – people started trooping in to see if we can give them empowerment materials. So many people came here asking us to give them grants, loans; but they don’t know that SMEDAN doesn’t give out loans, grants or empowerment materials. What SMEDAN does is more technical than all of those. Our major mandate is to provide basic entrepreneurship development training, business development support in terms of counseling, monitoring the activities of Micro, Small and Medium Enterprises and evaluating their business. In the area of policy framework, we develop policies for SMEs in the country and we also intervened in between MSMEs and agencies of government that has one thing or the other to do with MSMEs, like helping to facilitate access to finance through the Development Bank of Nigeria, Bank of Industry, Agriculture Bank of Nigeria, as well as commercial and microfinance banks. We also facilitate access to raw materials. That is we try to guide MSMEs on where to get raw materials. We also do a lot of synergy and collaborative works with other sister agencies. Basically SMEDAN is not an agency that gives out loans or grants. But if you look at agencies like ours in other developing countries they combine the two, because even when you give them the necessary entrepreneurship and business development training the next thing they ask for is finance. They’re like, you’ve given us the training, give us access to finance, help us to get start-up capital; because basically our work is to facilitate the growth and development of small and medium sized enterprises in the country.
Growth and development in most developed societies were driven by SMEs. Why is this not happening in Nigeria?
 Basically they are, but the kinds of enablers that the MSMEs need to fully play the role in Nigeria are not there for them. In any major economy of the world, MSMEs are the major mover of economic development; now in Nigeria, we are championing the need to diversify the economy, and how can you diversify without the MSMEs? You can’t diversify without the SMEs because diversification means producing locally for our people. If you look at developing economies like us and developed countries,agencies like us in the developed countries, I know this because we have undertaken a lot of studies, we found out that the major thing that is hindering development agencies in this country is that we depend solely on the national budget to execute our programmes. Had it been SMEDAN is an agency that generates funds, the agency will be better placed to execute our programmes without much funding challenges; and with the declining economy now the budgetary allocations to agencies like ours will be affected compared with the plethora of activities and requests that we get.
Let me give you a typical example. An agency like us in Brazil, a country that has a population like that of Nigeria, the agency’s budget in 2015 was $1.8 billion. SMEDAN was established in 2003, but has had a total budget of $20 million up until 2015. So you see that there is no basis for comparison between how an agency like us in Brazil is performing and how we’re doing. Recently, I was in South Africa, in that country, in every one kilometer square, there is a staff of an agency like ours there covering that one Kilometer square meter, that means all the small and medium businesses within that area are being covered by that man, and he guides them through all the business development services and all the other things that they may need. The man is always there looking out for them, monitoring and evaluating the businesses with the objective of helping to grow and develop the businesses to the highest level possible. But in Nigeria, in a state where we have more than 1000 micro, small and medium businesses, we have only one or two staff tending to those services; so you can see the sharp disparity.
When I came in as DG of SMEDAN, the first thing that I did was to have a retreat. At the retreat we saw the need to amend the Act that established SMEDAN to enable us to generate funds from outside of the budgetary allocation. We have done so much on that, the process has gone past the first and second reading at the National Assembly; we’ve held a public hearing, we’re waiting for the third reading and subsequent passing of the bill. We are looking at ways of generating fund so that we can establish the National Enterprise Development Fund, which the President will appointa board to administer the fund; the fund will serve as a loan, a grant and also to serve as a window for business development and capacity building activities. We can also place the money in commercial banks and microfinance banks to serve as guarantee so the MSME operators can access funding. If we can solve that problem we would have solved all the major hindrances militating against this agency with the passing of the bill. We hope the National Assembly, with the rate at which they are going, will pass the bill as soon as possible because they understand the need for the development of SMEs, which is key to their constituency, because most of these people reside in the constituencies and when we get it right we will not have this issue of poverty, we can create jobs everywhere.
Let me just give you an example. The last survey that we had in 2003 we had 37 million MSMEs in the country, by having 37 million MSMEs in the country, if you can assist them to grow, even if each of the 37 million SMEs employ one more person, that means we will have increased employment rate by 37 million jobs; so there is the need for government to put more effort in that direction. I must appreciate the present government for the things that they are doing for SMEs. The Vice President has been championing the cause of the MSMEs; one of such initiatives is the MSMEs Clinic, we go from one state to the other and during which we provide intervention to most of the problems of the MSMEs. Last week we inaugurated the MSME Council which is saddled with the responsibility of coordinating the activities of all the MSMEs and inter-agency networking towards solving some of the problems that have been identified. I think the recent establishment of the Development Bank of Nigeria which will only cater for the needs of small and medium sized businesses in the country is something we should commend the government for. I think the federal government has seen the need for the development of the economy and that is a good way to go.
What would you say are the biggest challenges facing SMEs in Nigeria?
If you asked the SMEs what are their challenges they will tell you it is funding. If you asked me I will tell you that it is capacity. Many of the MSMEs have the money to do business but they don’t know how to do the business; the basic skills they need to do their businesses are not there and that is why the mortality rate of the MSMEs in the country is very high. Many of them just take their money and enter into businesses that they don’t know how to run, or how to manage; they don’t know how to keep records, how to keep accounts; they don’t know how to innovate and introduce new ideas into their businesses.
They don’t realize that there is the need for quality packaging, strategic marketing, all of these are required but many of them don’t know, they think the only thing they need to do business is money.
Federal and state governments have given a lot of incentives to people to improve their businesses but because they lack managerial ability and lack proper monitoring of their activities, some of them will even divert the money to other things away from the businesses that the money were meant for. But, I think that can be largely attributed to the fact that most of the small and medium businesses in Nigeria are informal. When I say informal, most of them are illiterates, most of them didn’t register their businesses, they don’t have bank accounts, they don’t have micro insurances for their businesses; they don’t have the managerial abilities; that is why the mortality rate is high.
From the statistics that we have, more than 90 per cent of Micro, Small and Medium Enterprise in Nigeria are informal. This is not something you will find everywhere. I told you that I was in South Africa, I was talking to a colleague who heads an agency for small and Medium-sized enterprises there; I asked him what was the percentage of Small and Medium-sized enterprises that are formal, he told me that they don’t have any informal SMEs in their country. What that basically means is that any business that is starting in the country you have to register it, it has to have bank accounts and all those things; but in Nigeria you don’t have all those things.
How can you access finances from the financial institutions if you don’t have a bank account. When you don’t even have proof of registration; we’re not even talking of CAC registration, even the business registration from Ministry of Commerce and Industry in the states, how then can they access finance? How will they know the procedure for accessing fund talk less of developing a business plan for assessment and subsequent development?
What is SMEDAN doing to address this problem?
When I came in we had that challenge and we talked to ourselves on how we can formalise the about 37 million micro businesses. We acknowledged that it was a very large number but we have to start from somewhere. So we decided to introduce the Conditional Grant Scheme for Micro Enterprises. Why we said we should give them grants before we set the condition is, you know these people have very little income, they are largely in rural area so you must do something to motivate them for them to key into your programme and formalise their businesses, and that should be like an incentive, something that will attract them, because if you asked them to come so that you can get them organised they won’t. In the first place, they are not happy with you because they are looking for finance and other things which they couldn’t get, rather you are asking them to come and be registered; their feeling will be you want to add to their problems because they know that the moment they are registered there will be issues of taxes. But we told them that was not the essence of the scheme. So we had to motivate them with incentives to formalise their businesses. So that was the reason we came up with the Conditional Grants Scheme for Micro Enterprises. With the Conditional Grants Scheme for Micro Enterprise we are targeting 550 micro businesses in each of the 774 local government areas in the country. What we intend to do is to give them a grant of N50,000, but before we give them the grant we want to formalise them by giving them certain conditions to access the grant. The conditions are you must register your business with CAC.
We’ve already opened discussions with the CAC and they are ready to lower the cost of registering the businesses and as an agency we have promised the micro businesses that they will not have to pay a single kobo for the registration of their businesses. We will handle the registration and pay for them. Secondly, we have discussed with a lot of banks and a lot of them have showed interest, to go into the locations of those micro businesses and open bank accounts for them.
Thirdly, we have entered into an MOU with a lot of insurance companies to provide micro insurance cover for their businesses; and we as an agency we are offering them training in capacity building in the areas of managerial abilities, entrepreneurial training among others. So with all these conditions in place, we as an agency can now give them grant, but we will urge them to add two more people into the businesses. If the person is an akara (bean cake) seller, let two more girls help her sell the akara while she fries it. What we’re doing invariably is that if we have 550 people that we give grant in every local government and each business takes in two people, that means we will have 1650 persons in each of the 774 local governments in the country, when you add it up you will have 1.5million people covered in that year and we want to continue with the programme for a period of four years. So if 1.5 million people are covered in one year, multiplied by four it means we will have about 6million people covered whom we have helped to formalise their businesses. And in the four years, other people that have not benefitted from the scheme will key into the scheme and they will see the need for what we are doing, and then continue on their own to formalise their businesses.
Again, as a function of the scheme we have provided a certain proportion of aid to serve as motivation so that we create a form of competition that will make participants aspire to meet the conditions set up by the agency.
The way this works is that we told them that after three months we will evaluate their businesses and then choose the best 10 in each local government, and then give the best 10 businesses additional N250,000 to invest in their businesses but this time around as a loan and not a grant even though it is a non-interest loan. The next time we will choose another set of best 10. What we are trying to do is to motivate them so that there will be competition and then everybody
will want to meet the condition. Attached to that again is that, we thought, why can’t we develop a programme which we will call Human Development Entrepreneurship. Whatwe are doing with this is we are looking for persons with skills. So we said let us start with the medical doctors. So we said let us go to each local government, get two medical doctors who are indigenes of the local government areas and offer them a loan of N2.5 million to establish a local clinic at the local government area to achieve the following: One, bring healthcare closer to people at the grassroots level; secondly, we will be creating jobs for others; thirdly, we’re creating entrepreneurs, by so doing we will develop and have a very big hospital which can employ a good number of people and it will benefit the community at large. Besides, we will be reducing the rate at which people travel long distance to access simple healthcare facilities. Then if it is run by the local indigenes, they are in tune with the culture of that locality, so it makes it easier to interact and have a better relationship.
Recently, the CBN opened an FX window for SMEs, in a way trying to address one of the major challenges of operators in that sector of the economy. Are there areas of cooperation between SMEDAN and CBN? What form of synergy exist among relevant agencies of government with regards to MSMEs?
 When I came into office at the federal level, one of the first observations I made was that there was lack of synergy between agencies of government. Government must do so much to achieve that by facilitating a better synergy and direction between us (government agencies) because, let us not see ourselves as competitors, as if we’re competing, a situation where everybody wants to own his space and doesn’t want another person to come close to it. That shouldn’t be the case since we are all targeting Nigerians; the benefits go to Nigerians, not to me, not to Mr. President. We were all appointed by Mr. President so what we should do is to help the people that have the mandates of Nigerians to achieve their mandate by giving our best, by synergies, to collaborate between us to move the country forward.
Unfortunately some agencies don’t want to work with any other person, they want to do things on their own and own the programme so they can say this is mine, this is what I have done. But that is wrong. To me, what is needed is for us to synergise, we need to work together because we are not doing the work for ourselves, we are working for the benefit of Nigerians. In terms of collaborating with other government agencies, we have been doing a lot with other agencies of government. We are doing a lot of work with the Bank of Industry, we have a programme called NADEP, the National Entrepreneural Development Programme. It is a tripartite programme with BOI and Industrial Training Fund (ITF) and SMEDAN.
We are also working with the BOI on the Small and Medium Enterprises Rating Agency of Nigeria; we are working with BOI and Nigerian Import and Export Bank (NEXIM) on that. We are also working with other agencies on the business training platform that was put together by the Vice President to ensure that all agencies that have one thing or the other to do with the MSMEs are brought together to interact with the MSMEs with a view to addressing their problems. We had a meeting on that platform in Plateau State last week, we will be having another in Kaduna State this week.
Essentially, we have made a lot of efforts to collaborate with other government agencies. I also took time to visit the CBN governor to see how we can collaborate with the CBN in so many areas especially on the Micro, Small and Medium Fund that is with the CBN. In fact, we are asking that we should serve as referral point because this is our constituency, we know these people; we can also provide independent monitoring and evaluation services and we can give the CBN report on the performances of the MSMEs. We also think we should provide entreprenurship training because this agency was set up to also provide entrepreneurship training. We areexperts in that, we have very capable hands that can provide the trainings, we have gone to various countries for entrepreneurship trainings; instead of contracting out to consultants who charge a lot of money, our staff should be allowed to facilitate the trainings. This agency can provide the trainings for free, the only thing that we need is logistics, may be Basic Travel Allowance for our staff to go round the places. Doing so will reduce the cost of running the government. I believe these are the kind of areas that we need to synergise and collaborate on.
When I met with the CBN Governor, he set up a technical committee consisting people from the CBN and our people but so far there has been no progress on that for about eight months now; and as I said earlier, we must commend the Federal Government and the Federal Ministry of Finance for establishing the Development Bank of Nigeria, which is charged with making finances available to micro, small and medium enterprises. But what we are calling for is the need for us to work together with the Development Bank of Nigeria because the major mandate of the bank is to provide loans to MSMEs and the mandate of SMEDAN is to see to the growth and development of MSMEs in the country.
It is important that we work together so that we know the kinds of people that will benefit. Doing so will also help in accessing loans from the commercial and microfinance banks because we know commercial banks that are MSME friendly; we know the microfinance banks that are MSME friendly. So there is the need for us to have these kind of collaboration and we should be able to evaluate the performances of the people that will benefit from the loans and give the reports to the government. We should also be able to provide a window of linkages between the financial institutions and the MSMEs.
With the fall in oil revenue and the search by government for alternative source of funding, focus shifted to taxation. Would you say that MSMEs are contributing a fair and proportionate share to the treasury?
 I intend to visit the chairman of the Federal Inland Revenue Services (FIRS), carry out some sensitization campaign at the various local markets and environments on the need for them to formalise their businesses because there is little they can benefit if they are not formal. We need to do a lot of mobilisation and sensitisation exercise to see how we can help; even the media houses have to come on board and help to facilitate initiatives like town hall meetings in the local communities, not in the urban centers so that we can let them know how they can register their businesses and the benefits that abound in doing so. In fact, the good news is that the FIRS has reduced the taxes that are payable by the MSMEs, which is a welcome development. The CAC has also reduced the fees for registering MSMEs; a lot of other banks are also willing to reduce cost of borrowing for MSMEs. However, what we need is to engage with each other more, we need to collaborate and sensitise the general public.
Can you shed light on SMEDAN’s One Local Government One Product programme and the industrial clusters?
The major hindrance is that we are trying to solve the basic problems as to what will immediately impact the work of our agency. However, we recognise the work of those ministries and agencies and that is why, in collaboration with the Ministry of Trade and Investment, which is our supervising ministry, we are trying to develop clusters. We are trying to organise organic clusters and some clusters that have common competitive advantage. That was why we developed a programme called One Local Government One Product (OLGOP).
The main aim of OLGOP is to identify an organic cluster in a given community; when we identify them we will provide them with common facilities. It could be a common machine that they can work with within the cluster and then we provide them with entrepreneurship training, monitor their activities, then provide them with access to market. That means we should get them off takers of their products. We have five pilot programmes of the OLGOP projects in the 2016 budget. One in Katsina State for kilishi production; in that place we will organise them into a cooperative society and then provide them with a common facility, we will also rent and pay for a place to warehouse the common facility, give them entrepreneurship training, then give them a working capital to start production with and then link them up with the market. As I said we have five pilot projects: One is in Abuja, the other ones are in Osun State, Anambra State, the other one is in Kaduna State for honey production. The one in Anambra State is for palm kernel processing;Â the one in Osun is for Irish potato farming; in Abuja it is for cassava processing into garri. Work is already in progress on the pilot project. We have secured locations for them, we have given them entrepreneurship training; what we are waiting to do in the next one week of two is to sign memorandum of understanding with them after which we will give them the necessary machine and the working capital to start work with.
We are looking at 109 centres in the OLGOP project in 2017, that is one in each senatorial district of the federation; then next year we are looking to set up one centre in each of the federal constituency in the federation and in 2019 we will target the local governments that do not have a centre. These are some of our plans. One of the things that we want to achieve with it is that we want to upscale their profession in a better and qualitative way, teach them how to brand their products and then have access to market where they can sell their products, which is the last and most important thing.
With the OLGOP programme I believe we will get somewhere because in each centre that we set up, other people that are also into any other form of production or food processing activities can learn from the beneficiaries of the OLGOP programme.
We also have IDCs. There are 23 of them in all; the IDCs are places set up to train people for industrialisation. Each of the IDCs have different workshops, there is the electrical workshop, mechanical workshop, electronic work shop, metal; some have woodwork workshop, textile production workshop and they have machinery that is suitable for the different workshops. Fortunately for us some of the workshops were established since the 1980s, but the centres have been left to rot. In some places, some centres don’t have roofing, the walls have cracked in some others. In some others the walls have fallen off; most of the machines have become obsolete while some have not been used even once since they were installed. We also found out that the capacity of some of the personnel that are manning the centres have become outdated. I believe we need to do so much to revive the IDCs because the idea of the IDCs was to provide common facilities like power, good roads, networking and link up space for the MSMEs.
Unfortunately, in some of the places where we don’t have fences around the centres, the land have been encroached on and in places where we have fences the buildings are dilapidated and the machines are obsolete, as I mentioned earlier. The good news is that the West African Development Bank has granted SMEDAN a grant of $1 million to carry out an in depth study of the 23 IDCs to give us a better understanding of how best to utilize the IDCs and the best way to have a PPP arrangement with some private companies so that we can revive the IDCs and upscale the production activities at the centres for better use and for the benefit of the country as is the case in other countries.
It’s about 14 years since SMEDAN was created, would you say that the agency is close to achieving its objectives?
 In some areas we have really done good. In the area of entrepreneurial training the agency has done very well, we have trained quite a good number of people in entrepreneurial training. In 2016, we worked extensively with the Industrial Training Tund. ITF has trained about 10, 000 people in 15 states and equipped them with vocational and technical skills; SMEDAN then complimented that by giving the 10,000 people entrepreneurship training. The second stage of the entrepreneurship training for the other 18 states will be coming up this month (May). Again, we facilitate entrepreneurship training, capacity building around vocational and technical skill in collaboration with the National Assembly because members of the legislature domiciled their constituency projects with SMEDAN to provide entrepreneurship training and empowerment materials to people in their constituencies.
We have been doing a lot on that. This year alone, we have trained over 1000 aspiring entrepreneurs in different constituencies around the country. We have also done a lot of collaborations with other developmental partners. In December 2016, we launched a credit information portal in collaboration with Department for International Development (DFID). The importance of the portal is that any MSME can log on to the site and see a number of financial institutions that are willing to lend to MSMEs and the kind of loans that they have, the portal also has conditions attached to each of the loans and grants. Any MSME operator can also apply for funding through the portal. About 100,000 MSMEs have keyed into the portal in the last three months. What that clearly means is that you can get all the credit information available in the country on the portal from anywhere. That is a very laudable achievement; we have now written to the CBN to compel all financial institutions in Nigeria to key into that portal and provide all the credit information from their institutions and make it available on the portal to make it easier for the MSMEs to access.
 We also launched the Business Development Services Providers Accreditation Framework in Lagos. It was done in collaboration with James Phillip of DFID. The essence of it is to regulate the activities of business development services providers in the country; what used to obtain was that anybody can come up with a name for himself and start providing business development services to local governments, state governments, federal government and even private enterprises.
Many of such people are not well trained, they don’t have what it takes to do it and this reflects in the quality of the services that they render to the small and micro businesses in the country. So we want to have an accreditation framework; we will have an accreditation committee such that anybody who wants to carry out the services of a business development service must pass the test of the accreditation committee for us to certify you to go into the practice of business development services provision.
The SMEDAN Act is before the National Assembly, what is the amendment you are seeking?
 The focus of the bill that we have with the National Assembly is to permit us to generate revenue outside of the budgetary allocation, that is one. If we get that right, at least 70 per cent of the problems of MSMEs in the country will be solved. Secondly, we want to get more regulatory power to enable us regulate the activities of service providers, and to regulate on all issues that are within the framework of the ecosystem of MSMEs in the country. As we speak, the law does not give us the powers to regulate those activities. As a matter of fact, by the Act that established the agency, commercial banks are supposed to give us report on what they do with MSMEs in the country. Some of them will claim to be funding SMEs but in the real sense they are not. If you look at their books what they do is not something to write home about, but if there is an agency that regulate these activities and find out how far they have gone, because there are many policies by the CBN which the commercial banks and microfinance banks do not abide by.Recently, the CBN had to sanction some commercial banks that failed to comply with the CBN policy regarding $100 million FX window for SMES to import various needs that they need for their businesses. CBN need to do more in terms of compliance with its policies by the financial institutions. I must commend the Managing Director of the newly established Development Bank of Nigeria, he is someone I have never met, but just before you came in here, his Personal Assistant was here to schedule an appointment with me so that we can explore how we can work together. Those are the kind of people that we need on the side of the government because he saw the need for us to collaborate, he knows that there is an enormous responsibility on SMEDAN as well as his own bank, and for us to succeed we need to work. As a matter of fact  Rawe are ready to assist him to succeed in whatever mandate that he was given.
