BY KENNETH EZE
Entrepreneurs, advisors, and SME enthusiasts aver that the small and medium scale industries segment, often described as the engine room of the economy, can ameliorate the festering foreign exchange and unemployment challenges confronting Nigeria.
Chief executives, consultants and analysts who spoke to The Point shared the views that micro-export is a honeypot that Nigeria can explore to solve the shortfall in forex supply, which is exacerbating inflation, unemployment and other social vices.
Chief Executive Officer, Multimix Group, Obiora Madu, decried that the federal government only remembers the Micro, Small and Medium Enterprises during stormy weathers in the global oil market.
He said, “Relevant stakeholders are aware of the potentials of the micro-export segment, domiciled with SMEs, but sadly, they only remember the segment when crude oil price comes under bashing at the global market.”
Madu’s views were shared by Taofeek Adeleke, a micro-exporter, whose company, TA & Sons, deals in cashew nuts.
Adeleke said, “The system in Nigeria appears designed to frustrate private businesses, particularly the small ones. Government and her agencies make so much noise in the media about good programmes, but we don’t see any action.”
Madu and Adeleke identified marketing and financing as the major issues militating against the micro export in Nigeria.
Adeleke said, “the government doesn’t help in any way. You have to look for buyers abroad, source your supplies locally and bear the burden of financing.
“The worst is that government agencies bring unnecessary bureaucracy to bear on micro export activities. Imagine SBS inspecting and certifying the products you have firm orders for, only for government agents to delay shipment until the goods go bad. And you cannot hold them liable for such negligence.”
However, Chief Executive Officer, Nigerian Export Promotion Council, Olusegun Awolowo, while agreeing with Madu and Adeleke, noted that the Council has been doing much to help the SMEs.
According to Awolowo, several challenges confront SMEs in Nigeria.
“Firstly, access to finance is the major challenge we witness. At interest rates of upwards of 20 per cent, it is very hard for SMEs to access finance. They cannot get the necessary loans to scale up production. This makes it hard for them to meet local demand, let alone international demand.”
“WHEREAS micro-exporters are subjected to the rigour of securing the HACCP for shipments through the seas, forwarding agents around the MMIA do brisk business WITH it”
While Adeleke appreciated the concern of Awolowo on financing challenges, he listed lack of government support and bottlenecks as daunting challenges.
“How can SGS, armed with an international buyer’s specifications, inspect and certify a product, only for government agents to hold it down, he pondered?”
Madu, wondered what the business of agencies like the National Agency for Food and Drug Administration had to do with certifying products being packaged for export, if not merely creating unnecessary bottlenecks.
Awolowo agreed that the issue of certification is another challenge.
“Getting the necessary certification to break into the European and North American markets is challenging and costly for SMEs. Buyers, particularly in agro-processing, will not do business unless you have the HACCP certification.”
He added that “NEPC is working with many SMEs to ensure their processes meet the Hazard Analysis Critical Control Point standards with the ultimate aim of gaining the certification.”
The Point gathered that the Hazard Analysis Critical Control Point certification is an important international standard, which defines the requirements for effective control of food safety.
Whereas micro-exporters are subjected to the rigour of securing the HACCP for shipments through the seas, air-freighters, international courier companies and forwarding agents around the Murtala Mohammed International Airport do brisk business by having the Customs and Excise Department, Ministry of Agriculture and the NAFDAC issue certifications that make up for it, within hours and at most days, but their cut-throat charges discourage any form of commercial micro-export from Nigeria by air.
A PricewaterhouseCoopers MSME Survey 2020 titled “Building to Last,” highlighted that “The MSME sector is the growth engine of any economy contributing to its development, job creation and export amongst others.
According to the World Bank, MSMEs represent about 90 per cent of businesses and more than 50 per cent of employment worldwide.”
The survey which sampled the Small and Medium Enterprises Development Agency of Nigeria, chief executive officers and small business owners around Nigeria was “aimed at gauging experiences of sector players, assessing the underlying issues which MSMEs face and providing insights on this strategically important sector.”
It pointed out that “Formal SMEs contribute up to 40 per cent of national income (GDP) in emerging economies.”
Specifically, in the case of Nigeria, “The latest SMEDAN/NBS MSME survey indicates Nigeria’s SMEs contribute nearly 50 per cent of the country’s GDP and account for over 80 per cent of employment in the country. No doubt, the sector is pivotal to Nigeria’s growth including reducing poverty levels.”
Despite the significant importance, contributions and potentials, the survey bemoaned that the sector is “weighed down with challenges,” to the detriment of the country’s economy.
“However, the sector continues to be weighed down with challenges which ultimately impact the nation’s growth,” it added.
PwC classified the numerous problems confronting SMEs in Nigeria into three major categories.
Thus, “Finding customers, infrastructure deficit and insufficient cash flows follow closely as the most pressing problems for MSMEs.”
With all the attendant problems, the NBS report of October, 2021 on the GDP made it clear that export earnings have been adversely affected.
It stated that “Net Exports recorded positive growth rates in the first two quarters of 2020 and shifted to negative growth rates in third and fourth quarters of 2020 as well as first and second quarters of 2021, a departure from the trend in 2019.”
In addition, the NBS pointed out that “Net exports grew in real terms in Q1 and Q2 2021 by –110.50 per cent and -74.49 per cent respectively. On an annual basis, net exports grew by -30.00 per cent in 2020 compared to 7.64 per cent recorded in 2019.”
Concerned stakeholders observed that this steady decline was hurting the economy and that it could get worse unless measures were urgently put in place to arrest the situation.
Harnessing micro-exports for economic growth
It might be easy to simply blame the government, but it must be noted that the SMEs, the so called established businesses and financiers also have roles to play.
The PwC Survey noted that cash flows remained contentious, but also pointed out that the SME firms were liable on poor or lack of standard documentation.
“Financial statements are major requirements when looking to secure a loan, this makes it paramount for firms to keep proper and standard documentation of their transactions,” it noted.
It also added that this could be solved through an anchor scheme that would confer capacity and responsibility on players in that segment.
“We recommend the establishment of an anchor scheme that will bring together SMEs and provide capacity development and training programmes on topics such as corporate governance and having proper documentation in place to access finance. With this anchor scheme, SMEs could gain insights on global best practices and strategies for accessing finance for business growth.”
In addition, micro-exporters and enthusiasts would want to see shipping protocols harmonised both for items going by air and sea to save time and costs.
They wonder why commodities can be certified within hours at international airports by freight forwarders and courier companies in concert with agencies of the federal government simply because the would-have-been profit would be readily wiped away by freight charges or courier costs, which are generally prohibitive.
Operations Director, Iwu & Sons, Iwuoha Obinna, would want to see conscious efforts by the government to domesticate export and import standards, and back it up with massive enlightenment.
He noted that most micro-exporters just venture without being fully abreast of standard global trade requirements.
“What we see is that the rules put in place by exporting and importing countries are set up to favour big exporters. The Nigerian government must look at those rules and seek ways of ensuring that micro-exporters can take advantage of existing opportunities,” he stated.
Almost alluding to the anchor scheme pointed out in the PwC survey, Obinna noted that those who would want to patronise Nigerian commodities from outside the country set out terms and conditions not quite within the reach of the micro-segment.
“The government should encourage micro-exporters to team-up to take advantage of opportunities in the global marketplace,” he said.
Madu called on the government to evolve fiscal and monetary policies to stimulate export activities at micro levels, noting that there are several commodities of Nigerian origin in high demand across the world.
Businesses operating at the micro level need to have policies in place to encourage them and they need to be empowered with knowledge to take advantage of such rules, several enthusiasts told The Point.
Madu, Adeleke and Obinna share the opinion that with requisite support from the government and financial institutions, the micro-export segment can help tackle the lingering forex, unemployment issues and social vices plaguing the country.
Again, it’s imperative that all hands must be on deck to solve these problems, particularly, if the claim that it can impact on social vices is perceived to be real.
Well-meaning individuals and businesses can emulate PwC Nigeria which averred in the instant survey that it “has established the SME desk to support the growth, sustainability and development of the SME sector in Nigeria.”
