SMEs: Assessing Related Policies
Activities in the start-ups and Small and Medium Enterprises (SMEs) sub sector of the nation’s economy received an enhanced attention in the development finance policy of the current administration of the Central Bank of Nigeria (CBN).
Those interventions have proved to be well tailored as they are implemented in recognition of the essential role that sector plays in the economy not just in Nigeria but elsewhere in other climes. The policy is based on the understanding that an increased access to finance for start-ups and SMEs is highly essential for the nation’s quest for accelerated economic growth.
Under it, special consideration was and is still being given to information and communication technology (ICT) infrastructure envisaged as a requisite to enable SMEs perform more efficiently and become globally competitive. It has been a deliberate policy under the administration of Godwin Emefiele to advance knowledge and innovation through various initiatives targeted at promoting youth’s entrepreneurship, research and development.
Specifically, as users of new technology, the CBN initiated this policy directed at incentivising the adoption of innovations that will improve SMEs competitiveness and productivity. This is what is going on around the world as operators in the sector continue to harness the benefits of the knowledge economy to accelerate economic growth and development.
Under this policy also, the CBN, in demonstration of its commitment to a new impetus to SMEs in Nigeria, rolled out massive developmental interventions in some critical sectors of the Nigerian economy, especially in agriculture, manufacturing and SMEs.
In agriculture for instance, so much attention was given to SMEs through the Anchor Borrowers’ Scheme, a policy that cut across the broad spectrum of the agricultural value chain. To deepen the opportunities available to intended beneficiaries, the bank put in place financial intervention schemes directly aimed at supporting SMEs such as the SME Credit Guarantee Scheme (SMECGS); Micro, Small and Medium Enterprises Development Fund (MSMEDF); Youth Entrepreneurship Development Programme (YEDP); Agri-business/Small and Medium Enterprises Investment Scheme (AGSMEIS); Creative Industry Financing Initiative (CIFI); Targeted Credit Facility (TCF) and the Nigeria Youth Investment Fund (NYIF).
Explaining the thinking behind the decision to give priority attention to youths who form the bulk of start-ups and other businesses in that category, Emefiele has remained consistent in his position that despite the hues, cries and complaints about this country, Nigeria remains the land of indescribable opportunities, the land where finding a simple solution to a common problem can lead to unimaginable financial prosperity.
Such is his belief in the potentials inherent in the sector often referred to as the unorganised private sector that he made the participation of the operators in the sector and by extension, in the nation’s economic activity the pivot of his development finance policy. It is also a reflection of his people-focused policy drive which is redefining the perception of central banking in the country hitherto hinged more on financial system stability.
There is no gainsaying it that the policy is driving development finance in a measurable positive way while at the same building a resilient financial system that can serve the growth and development needs of the Nigeria economy as a whole. The totality of the policy in this direction is youth engagement geared towards job creation and fostering inclusive growth through massive support to the micro, small and medium enterprises (MSMEs).
A recent report of the World Bank noted that, ‘‘before COVID-19, about 40 percent of Nigerians were living below the national poverty line, and millions more were vulnerable to falling into poverty.” The report went further to state that, “Simulations suggest that the crisis could push more than 10 million Nigerians below the poverty line unless adequate mitigation measures are implemented.’’
The creation of the N75 billion NYIF to provide opportunities for the youths to engage in the Micro, Small and Medium Enterprises (MSME), is novel in its intention targeted at creating employment, alleviating poverty and increasing the level of economic activities that will translate into economic growth and development.
NYIF is a youth-focused programme in which each fund approval will range from N250, 000 to N50, 000,000, with a spread across group applications, individual applications, working capital loans set at three years, with a single-digit interest rate of five per cent.
This is designed to introduce self-employment to ease the pressure on the youth in the face of disappearing white-collar job opportunities while fast-tracking development. It also served the purpose of hydrating the thirst of many Nigerian youth willing to go into businesses of their choice, be their own bosses while at the same time nudging their destinies in the desired direction.
In the first quarter of this year, 447,671 beneficiaries were supported under the apex bank’s targeted credit facility across the country, with 58,229 businesses and 389,442 households affected by COVID-19 pandemic stimulated job retention across the real sector.
With particular reference to the MSMEDF segment of its intervention, CBN financed 488 MSME projects nationwide, comprising 120 state projects and 368 private sector projects in agriculture, manufacturing, services, renewable energy and trading with 216,706 direct and indirect jobs created across the country.
There were also 55,422 budding entrepreneurs trained under the Entrepreneurship Development Centres (EDC) established under the intervention.
Available data indicate that 28,961 agri-business and artisanal projects were financed across the country, while 107,932 direct and indirect jobs were created under its Agri-business Small and Medium Enterprises Investment Scheme (AgSMEIS). Similarly, CBN financed 395 youth-owned projects in various sectors of the economy in line with its resolve to support entrepreneurial aspirations of youth MSMEs.
It needs to be emphasised that the objective of the Fund is to channel low-cost funds to the MSME sub-sector of the Nigerian economy through Participating Financial Institutions (PFIs) to enhance access by MSMEs to financial services; increase productivity and output of micro-enterprises; create jobs; and engender inclusive growth. Before this time, many a youth dream had crumbled due to lack of capital.
The eligible enterprises under the Fund include: enterprises in the agricultural value chain, cottage industries, artisans, services, renewable energy/energy efficient product and technologies, as well as trade and general commerce.
However, given the limited fiscal space due to the significant drop in government revenue, the CBN has had to intervene with other development finance tools and some monetary policy innovations to aid recovery without jeopardising price stability. It goes to show the level of commitment to the success of the policy specifically developed to turn the youth sector into an economic entrepreneurial base.
It is important to note that these policies of the Emefiele administration have, in no small way, aided, in an accelerated manner, the impressive economic activity in that sector of the economy on a perceptibly sustainable basis.
Gilbert is an economist based in Abuja