‘SMEs need funds, infrastructure to unleash potential’

Jon Kachikwu is the newly elected chairman of the Small and Medium Enterprises Group (SMEG) of the Lagos Chamber of Commerce and Industry (LCCI). He is also the chief executive officer of Jon Tudy Interbiz Limited, a business located in Nigeria and the United States of America. In this interview, Kachikwu, a big exporter, tells ODINAKA ANUDU that many small business owners are accessing the Central Bank of Nigeria’s MSME Fund at over 20 percent, rather than nine percent, from deposit money banks, pointing out that they need better infrastructure to thrive.

You have just been elected chairman of the Small and Medium Enterprises Group (SMEG) of the Lagos Chamber of Commerce and Industry (LCCI). What plans do you have for the group?

My first plan is to ensure that the public gets to know what we are doing. So we take publicity very seriously. Secondly, you know that one big problem micro, small and medium enterprises (MSMEs) have is funding. In order to minimise the impact of this problem, we intend to float a cooperative society. This has been approved by members of the executive. We also want to ensure that members are educated through the Business, Education, Services and Services (BEST) unit of the chamber. We equally intend to talk with one or two government agencies that are intimidating our members.

Experience has shown that many people have money but do not know how to grow with it. So, do you consider funding the major problem of MSMEs?

Without money, you cannot do anything.  In this part of the world, infrastructure is also a big problem. It makes Nigeria one of the most difficult places to do business.  I can tell you this because I have a sister company in the United States. I know the kind of encouragement the US government is giving to businesses like ours. Whether you are an American citizen or not, once you are doing a legitimate business, the US government is ready to support you. So in essence, funding is essential, but infrastructure is not there. Electricity is key; security is another. Environment is also important.

So what should entrepreneurs do before asking for funds?

You have to get your business plan right, and you need to do your feasibility studies. They have to be bankable before you talk of funding. Also, you have to know the environmental impact of your business.

Are you planning to seek funding from development banks like the Bank of Industry?

Yes, we are going into that. This is why I mentioned earlier that we would form a cooperative union so as to be in a better position to source it. Here in Nigeria, no bank will give you funds without collateral. We are looking at the single-digit rate, because if you give me a loan at 28 or 35 percent, as many microfinance banks do, what can I do with it? When I went to China in 2013, loans to SMEs were obtained at six percent rate, but I learnt that it is two percent today. China is controlled by over 85 percent of SMEs, while in Europe 70 percent of businesses are SMEs.

So what are the key challenges facing SMEs in their bid to access the Central Bank of Nigeria’s N220 Billion MSME Fund?

No micro, small or medium scale enterprise can have access to the fund except through commercial banks. The major problem is that commercial banks will never give it to you at nine percent. They will tell you it is nine percent, but by the time they put one or two things together, it will be between 22 and 25 percent. We got one last year from one bank, which I will not mention. We were even happy to access it at that rate, until we discovered it was given to them by the CBN at nine percent. We also gave them collateral.

Apart from interest rates, are there other conditions banks are attaching to loans that are antithetical to MSME growth?

There are issues of landed property and capital, movable or unmovable. Sometimes they ask you to bring land, but how many MSMEs can meet this condition? In the US what they want is your annual turnover, your feasibility studies and business plan. They want to know how lucrative your business is. Once they see that your turnover matches your request, they will give you but will also monitor the funds. Here, Nigerian banks are not ready to monitor; all they need is your collateral and off you go.

So do you subscribe to the federal government setting up a monitoring team that will supervise the disbursement of the 220 Billion MSME Fund?

Yes, it will help a lot. I totally subscribe as this will help a lot.

Given the current economic situation in the country, how will you assess MSMEs’ performance?

Obviously, MSMEs are closing shop. Right now it is the survival of the fittest. Our company has been doing business here and overseas for 28 years, so I can tell you because we were importing before we went into export business. SMEs are not doing well. With the foreign exchange situation, we have dollars in the bank but we cannot withdraw them.  Banks tell us they do not have dollars. If you do not have a lion heart, you cannot do business in Nigeria. This is one of the reasons people are passing through the back door. We want an easy way out. Despite this, government still comes after us.

How are MSMEs coping with regulatory agencies?

These agencies are not helping matters at all. The Customs, the Quarantine, NAFDAC and many others are not helping us. Government has to look into the activities of these agencies. In Iddo area, the Lagos State Waste Management Agency (LAWMA) will come once in two weeks to clear wastes, but we clear on daily basis, yet they bring big bills. The Lagos State Environmental Protection Agency (LASEPA) will come and if you do not have a signpost, they will bring you a bill of over N500,000. Another environmental agency from Alausa (Government House) will come and tell you your toilet is not properly sited. These people will come with different bills and, at the end, you either comply or you contact who you know.

So do you support harmonising these agencies?

That will be the best because of the type of environment we operate. In other countries there are such agencies and they play different roles according to the law, but not so in Nigeria.

Do you consider mentoring important for start-ups and MSMEs?

Yes, mentoring is key. I am going to encourage as many members as possible to participate in training because they can improve a lot when they are properly trained.

How do you think Nigeria can get out of the present economic quagmire?

Government should look seriously at agriculture and export. The Indians, the Chinese and the Lebanese are doing that and they are succeeding. I believe President Buhari has started well. But we had an experience with the past administration. We have a farm in Delta State; we spent over N25 million to set up that farm. The State Ministry of Agriculture came but could not do anything for us. It was 100 hectares, leased from a community for 22 years. Though the immediate past agriculture minister did well, when it came to Delta State, It did not trickle down to commercial farmers like us.

ODINAKA ANUDU