2018: SMEs Hopeful As CBN Intensifies Intervention

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CBN intervention policies, There are strong indications that the sustained and diversified intervention programmes of the Central Bank of Nigeria (CBN) would provide the required platform for the numerous micro, small and medium enterprises (MSMEs) to position for ultimate transformation into the arena of industrialisation. That would be a landmark achievement in the diversification agenda of the Nigerian government aimed at attaining rapid economic growth.

All over the world, the role of MSMEs is crucial in achieving sustained economic growth. This stems from the economy of scale that guides the activities of various component and service providers. Hence, the MSMEs are recognised as the backbone of industrialisation in every economy. They are, therefore, given the necessary support ranging from discounted interest facilities, tax holidays to professional services, and other statutory incentives.

The CBN has played this remarkable role through various Intervention Fund programmes targeted at indigenous SMEs, including those in the agriculture value chain. The intervention policy was introduced in 1977 to create jobs, expand the real sector and boost the nation’s gross domestic product (GDP). It has remarkably addressed potential and real constraints experienced by Nigeria’s 20 million MSMEs, especially in accessing funds for working capital. The intervention scheme has gulped about N3 trillion during the 40 years it has existed.

The micro-schemes created under the CBN intervention policy are all sector-specific. They include the Agricultural Credit Guarantee Scheme (ACGS); Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL); Commercial Agriculture Credit Scheme (CACS); the N220 billion Micro, Small and Medium Enterprises (MSME) Fund; and the Anchor Borrowers’ Programme.

Others are the Small Medium Enterprise Credit Guarantee Scheme (SMECGS); the added N2-billion interest rebate funds under the revolving Interest Draw Back (IDB) of the ACGS Fund and strict supervision of operations of microfinance banks. Additionally, the CBN directed (and is monitoring) the establishment of agricultural desks at all deposit money banks (DMBs).

Since February 20, 2017, the apex bank has engaged in aggressive funding of the sub-sector through its multi-window forex intervention regime that has gulped $10 billion as at date – focusing on Wholesale, Investment & Exports, SMEs, Invisibles and Bureau the De Change (BDCs) segments, among others.

CBN Intervention: 2018, SMEs Hopeful As CBN Intensifies InterventionInvestigation showed that the CBN injected estimated $1 billion into the forex market in November 2017, in its bid to boost liquidity and sustain the stability achieved since the February 2017 reform. About $260 million of this amount was allocated to SME sector. The apex bank also provides professional services and assists SME operators to undergo the necessary trainings that will help them manage their businesses in the most profitable manner.

According to its monthly Economic Report for May 2017, a total of N424.6 million was guaranteed to 4,029 farmers under the ACGS in May 2017. Sub-sectoral analysis showed that the food crops received the largest share of N226.1 million (53.3 per cent) guaranteed to 2,699 beneficiaries.

On the other hand, livestock got N62.2 million (14.7 per cent) guaranteed to 282 beneficiaries, while cash crops sub-sector received N44.4 million (10.5 per cent) guaranteed to 221 beneficiaries. The mixed crops received N42.2 million (9.9 per cent) guaranteed to 597 beneficiaries while N38.3 million (9.0 per cent) was guaranteed to 137 beneficiaries, in the fisheries sub sector, ‘others’ had N11.2 million (2.6 per cent) guaranteed to 93 beneficiaries.

The apex bank disclosed recently that a total of 27,207 farmers, both individual and informal groups have participated in the ACGSF between January and August 2017, with Edo and Ogun States leading in the N3.88 billion scheme in 34 states. Industry watchers expressed optimism that the intervention funds are capably of stimulating industrialisation in the rural areas through the establishment of cottage industries and other services that are critical in running large factories located in the major cities. “Small and medium enterprise operators should see the CBN intervention policies as a sure way of launching them into the realm of industrialization where they are expected to act as feeder-sources to major manufacturing firms which must, in line with the principle of economy of scale, enlist the services of suppliers in the SME value chain,” said Gabriel Dickson, a Lagos-based major fish farmer.

To support the CBN effort, government is addressing those areas that constitute a cog in the wheel of progress against the targets of the intervention policies. Government is also determined to institute synergies between rural and urban dwellers by addressing the yawning infrastructure gap that has plagued developmental efforts. The Ministry of Agriculture and Rural Development is fast-tracking SME development leveraging on the fast-growing pace of the agricultural sector. The Economic Recovery and Growth Plan (ERGP), a blueprint of government’s strategic plan towards diversifying and repositioning the economy on the path of sustainable growth, has Agriculture as one of its pillars.

According to the National Bureau of Statistics (NBS), Agriculture contributed 24 per cent to overall GDP in real terms in the second quarter of 2017 (Q2 2017). This was higher than contributions in Q2 2016 and Q1 2017 which stood at 22.42 and 21.43 per cent respectively. Agriculture, financial services, manufacturing, oil and gas and services are key sectors that pulled Nigeria out of its worst recession in 25 years. In spite of this postitive trend, food price has been on the increase.

The NBS recorded that the increase reached 20.28 per cent (year-on-year) in July 2017, marking the highest in eight years. It said the increase was 0.37 per cent points up from 19.91 per cent recorded in June. The statistics bureau also said the July increase was the highest in the history of its inflation methodology series introduced eight years ago.

Findings showed that the bulk of SMEs’ working capital comes from personal savings. Data from the National Bureau of Statistics (NBS) showed that 80 per cent of existing 17 million SME operators sourced their working capital from personal savings, while 13 per cent are sourced through borrowing. “This is where the CBN intervention policies become critical. Industrialisation comes by consistent, steady and well-implemented strategies and this requires sufficient working capital so that smooth operations can be guaranteed,” said Dickson.

The CBN intervention policies will help in addressing the challenges experienced by MSME operators in achieving the desired results. These include poor monitoring and Information & Communication Technology (ICT) infrastructure deficit found to be acute among MSMEs. Skilled human capital is also in short supply. The operators are lacking in proper record-keeping. When the businesses are effectively managed, it goes a long way in eliminating incidents of loan repayment default and boosting their capabilities as they adjust to embrace the environment of industrialization.

According to Michael Nwobi, an Onitsha (Anambra state)-based industrialist, the CBN intervention facilities, have played significant role in rescuing Nigeria’s distraught MSMEs from self-extinction: “With such support, Central Bank has added the required impetus to fast-track the development of the real sector and achieve huge milestone towards industrialisation. This is how the Asian Tigers started. Well managed, the small businesses will become the backbone to the much-desired industrialization in Nigeria.”

Drawing attention to the need to develop the rural areas and encourage the set-up of cottage industries as a prelude to industrialization and job-creation, the United Nations Food and Agriculture Organisation (FAO) said, “Three-quarters of the extreme poor base their livelihoods on agriculture or other rural activities. Creating conditions that allow rural people, especially youth, to stay at home when they feel it is safe to do so, and to have more resilient livelihoods, is a crucial component of any plan to tackle the migration challenge.

“Rural development can address factors that compel people to move by creating business opportunities and jobs for young people that are not only crop-based (such as small dairy or poultry production, food processing or horticulture enterprises). It can also lead to increased food security, more resilient livelihoods, better access to social protection, reduced conflict over natural resources and solutions to environmental degradation and climate change.”

The intervention fund has sustained the backward integration activities of Nigeria’s major manufacturing companies. For instance, Nestle Nigeria, according to the company, has achieved 82 per cent local input across its wide range of products. Nigerian Breweries have achieved 60 per cent while Coca Cola has recorded about 80 per cent in local raw material input. Investigation showed that several large-scale Sorghum providers in Northern Nigeria are major suppliers to Nigerian Breweries in the production of its alcoholic beverages.

“Majority of them are beneficiaries of CBN intervention funds and they now run huge commercial farming that will place them above what can be imagined presently. This is why CBN must ensure that beneficiaries of its intervention funds are closely monitored and given all the support, so that the objective can be achieved,” Dickson stated.

The CBN governor, Godwin Emefiele, at the Chartered Institute of Bankers of Nigeria (CIBN) annual bankers’ dinner in Lagos recently emphasized on the need to sustain the intervention policies as a way of supporting government’s diversification agenda that will de-emphasise oil and gas for government revenues. One of this is the Anchor Borrower Programme targeted at high-impact sector of agriculture.

CBN intervention policies, He said, “To date, the Bank has committed close to N45.5 billion under the Anchor Borrowers’ Programme with active participation across 30 States of the Federation. In Kebbi State alone, over 78,000 smallholder farmers are now cultivating about 100,000 hectares of rice farms in 2016. It is expected that over two million metric tonnes of rice will be produced in that State alone annually.

“We remain committed to do more in the targeted crops such as rice, maize, palm oil, sorghum, tomatoes, cassava, cocoa, cotton, dairy, and groundnut. To consolidate on the gains of the Anchor Borrowers program, and reach more deserving small holder farmers nationwide, the CBN is forming strategic partnerships with Agricultural commodity associations.

“These strategic partnerships have already started yielding results with the commencement of the Rice Farmers association of Nigeria (RIFAN) Anchor Borrowers program where about three hundred thousand rice farmers across 20 states will be supported under the upcoming dry season cultivation.”

Recent CBN report showed that loans fully repaid by states under the ACGSF between January and August, 2017, was N3.7 billion. from Yahoo Mail on Android