The Federal Government’s move to roll out new set of palliatives for Micro Small and Medium Enterprises (MSMEs) is commendable, as millions of such businesses have no support in any form despite being the bedrock of the economy, the execution plan is the challenge at the moment.
The palliatives appear to be piecemeal, which should not be so. Besides, a robust economic recovery plan to deal with post-COVID-19 economic downturn should be the starting point. The stimulus should target the entire economy and not just one sector.
For instance, the new palliatives seem to focus only on what the National Agency for Food and Drug Administration Control (NAFDAC) could do, which is not enough.
Under the scheme, the government will give 80 per cent discount to all MSMEs that registered their product on the electronic platform of NAFDAC. Additionally, the Federal Government has also granted zero tariffs for the first 200 MSMEs to register on the agency’s platform.
The NAFDAC Automated Product Administration and Monitoring System (NAPAMS), is a software solution for the regulation and control of the importation, exportation, manufacture, distribution, advertisement, sale and use of foods, drugs, cosmetics, medical devices, chemicals, detergents and bottled water in Nigeria.
The incentive on products and services registration with NAFDAC is just one aspect. What happens after the registration is the issue. Lack of necessary finance to do the business has always been the main challenge.
The Vice President, Prof. Yemi Osinbajo reeled out the incentives the other day at the virtual unveiling of palliatives for MSMEs by NAFDAC, while tasking other agencies of the Federal Government to come up with palliatives for the MSMEs. He unveiled the electronic registration platform alongside the Director General of NAFDAC, Prof. Mojisola Adeyeye and representatives of other federal agencies regulating micro, small and medium enterprises in the country.
After unveiling the electronic registration platform, Osinbajo said: “These palliatives reflect the President Muhammadu Buhari administration’s determination to support MSMEs and the priority the Federal Government places on small businesses.”
He listed NAFDAC’s palliatives to include e-registration of MSMEs/products at 80 per cent discounted rate over a period of six months; zero tariffs for the first 200 micro and small businesses to register on the e-platform and waiver on administrative charges for overdue late renewal of expired licenses of micro/small businesses products for a period of 90 days.
While these incentives are commendable as noted earlier, the critical support the MSMEs need is finance. Not long ago, the Minister of State for Industry, Trade and Investment, Aisha Abubakar, announced that the Federal Government would assist the Small and Medium Enterprises (SMEs) to have better access to finance, a promise that requires dramatic policy thrust to change the extant situation and give blood to the businesses. Nigeria’s wobbly economy has been sustained by the small business, even at the most trying times.
Consider the contributions of market women, hairdressers, barbers, vulcanizers, mechanics, tailors and a host of other similar businesses at the grassroots level of the economy. These people are at their corners doing their own things. They constitute the invisible hands holding the economy at all times. And their contributions should not be discounted.
Unfortunately, the formal financial sector comprising commercial banks and other non-banking institutions like insurance companies, deposit takers and building societies have no place for SMEs in their credit lending scheme. The SMEs can’t meet the credit conditions set by these institutions.
The proliferation of micro-finance banks (MFB) has not solved this problem. There are about 920 micro-finance banks on record in Nigeria, established, principally, to make credit easily accessible to the informal sector, usually dominated by women.
Whereas the MFBs are supposed to advance credit to the poor on easily affordable terms, experience has shown that the banks seem to have even more stringent conditions than the commercial banks. Some businesswomen who have attempted to access credit from the MFBs have been disappointed.
There isn’t much difference between the micro-credit institutions and the conventional banks as both demand collateral security to qualify for credit. The repayment terms are even more flexible in the conventional banks than with the micro-credit banks.
For instance, while the conventional banks could advance credit for one year tenor, the micro-credit banks require just six months to repay any loan, a condition that could hardly be met by most small business owners.
Based on the foregoing, it is doubtful how the federal government intends to break the strongholds in the financial system to make funds easily accessible to small business enterprises. This is where stimulus is mostly needed.
What does the government intend to do and how does it plan to achieve it? The inability of the SMEs to access credit facility is systemic. Government requires strong policy paradigm shift to be able to put a new order in place. In the main, government should do more by making the operation of SMEs easier and accessible. The various agencies that are involved should be made to function in a more coordinated and robust manner. This is a customer-centred business. It is about the real sector that hardly receives serious action beyond rhetoric.
In the meantime, having one-stop office complex where micro businesses could do all their registrations without having to move from one part of the town to the other is a strategy that should be considered beyond COVID-19 exigency.
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