Over-dependence on incentives hurts SME capacity building
Most people would easily classify Nigeria as an educationally unfriendly country; going by the proportion of its annual spending that goes to education and some cultural and religious activities that impede child education. Increasingly, many are finding reasons to strongly believe that Nigeria does not have mush regard for learning and knowledge.While this may sound like a tough position to take, every fact seems to point in that direction. Some elaboration of these facts may be helpful. One may wonder what the essence of this exercise could be. Well, it may give us some lead to the problem of a seemingly increasing lack of interest in training and capacity building, among our SME entrepreneurs.
SMEs have been praised for their role in development. Many have limited this role to the so-called employment generation capacity of SMEs but that is incorrect. SMEs do more than job creation in the development process. Indeed, the creation of a pool of experienced low-to-medium level manpower is as vital to development as job creation. This is why manpower training and development should be emphasised by SMEs. Unfortunately, operators in this sector do not see any reason to spend on training. In most cases only the promoter or keyman gets any chance to be trained and such training must either be sponsored or simply free. This development has wide implications and it is time we began to rightly rank it ahead of their now over-flogged financial challenge.
Obviously, much has been done, and a lot is still being done, to help the SME sector to develop and fulfil its natural role as an engine of growth. Right from the time of the National Development Plans, through the time of the Industrial Development Centres, there has been concerted effort to support the sector. We may recall the days of the peoples Bank, the Nigerian Industrial Development Bank and many others. These efforts have been continued to date and rightly so.
Currently, the market is awash with financial facilities created to suit the SMEs. The Bank of Industry has led the way in focusing very significant effort on the provision of financial support for SMEs. The Central Bank is busy churning out funding to the banks for onlending to that sector. All these are efforts in the right direction. Unfortunately, there is no significant requirement that directs their attention to the need for training and development. Today, many of these funds are not getting maximal patronage. We need to ask why. We know all the open reasons for the slow disbursement but there are secret ones. It is my humble view that the low disbursement rate is partly a result of the extremely limited capacity on the part of the SMEs, even to understand the opportunities. They are very short on training and education.
As an advocate of the sector it’s my duty to help them with the truth. Nigerian SMEs have very large appetite for funds but suffer from extreme lack of appetite for knowledge. We need to challenge them on this. The way the authorities are going about it gives the impression that cash is all they need so throw it in without questions. We like to dump money on problems and hope they go away. There is hardly anything in the requirements for accessing these funds that encourages them to operate their businesses in a modern way, including staff development. We must include some employment and training criteria in their funding term sheet.
Even those who get the loans have not fared much better. Some have no capacity to effectively use the funds. It’s not enough to offer them cheap foreign exchange to import stuff. Even though that is not entirely bad, it answers to one side of the story. How many SME staff other than the keyman know anything about the opening of Letters of Credit? The absence of such skills could hurt performance of the facilities. It will also hurt staff job mobility when they want to change to other sectors. Staff training and development is one of the ways SMEs ought to impact the economy by providing experienced low and middle level manpower to support growth.
Our SMEs hardly respond to training opportunities that are not free. Perhaps there are too many free things flying around them. Before people can bid for government jobs as consultants they are required to train at the Centre for Management Development. They have to register and get accredited by various public regulatory institutions but those that need training are not encouraged to get it. Without holding brief for human capital developers, I think we are missing some opportunities by the absence of certain standards in the sector. We should insist on some form of investment in capacity building by the SMEs. There are too many reasons to think we promote ignorance.
First, Nigeria is world leader in out-of-school children (OSC). We are currently responsible for over 14 million of these children in the world. This is 47 per cent of the entire world population of OSCs –a number larger than the population of many sovereign countries. Over 40 per cent of Nigerians aged 6 to 11 years do not attend primary school. Second, most senior government officials do not send their children to Nigerian schools. Public educational institutions are considered to be so substandard that they are not fit even for the children of those who run them. Third, our annual educational budget is still hovering around 6 per cent as against the 26 per cent recommended by the UN. The Almajiri system, which the Sultan of Sokoto and the Emir of Kano have said has no Islamic foundation, has been foisted on poor people to keep them down in a 21st century Nigeria. Lecturers in many educational institutions are not sure of getting paid at the end of the month but political jobbers get paid in advance for jobs they will not do.
Ironically, Nigeria has a lot of educational institutions that give indication of hunger for learning. There are about 386 tertiary institutions belonging to both state and federal governments. The federal government alone has 36 federal universities, 25 federal polytechnics, 22 federal colleges of education and 104 federal unity schools. By the standards of many countries, this is a very large number of schools notwithstanding our population.
We need to get the SMEs to appreciate the importance of training. The bulk of their problem comes from their lack of interest in knowledge. How does innovation come about? How are new products and processes developed? SMEs seem to have been spoilt by the freebees from institutions like the EDC of Pan Atlantic University and some of the banks, which bend over backwards to support the sector. While I agree that no effort should be spared in promoting a vibrant SME sector, which is why I keep late nights writing this column for free, I think the operators should be required to show evidence of some annual staff development outlay to benefit from some of the interventions offered. This will help us in so many ways.
Emeka Osuji