Why start-ups, MSMEs deserve a better deal from Buhari
As Muhammadu Buhari settles down for real business, one key area his government must pay closer attention to is growing start-ups, micro, small and medium enterprises (MSMEs) into sustainable enterprises through good policies, creation of fair and competitive environment, as well as removal of gridlocks that impede their growth.
Start-ups and MSMEs are engines of growth and account for over 90 percent of businesses in Nigeria. But data show one out of three start-ups in the country goes out of business within three years of set-up.
The situation is different in China, where start-ups and MSMEs are seen as key growth drivers. It is on record that China’s rapid growth began after market-oriented and start-up-friendly reforms initiated by Chinese leader Deng Xiaoping in the 1980s.
MSMEs, today, account for over 60 percent of China’s gross domestic product and generate more than 82 percent of employment opportunities in the country.
In Nigeria, most start-ups and MSMEs are struggling with getting finance for expansion. Many entrepreneurs and smart Nigerians have bright and marketable business ideas and plans but cannot finance them.
Banks and other financial institutions demand between 17 and 35 percent interest rates from MSMEs that wish to expand.
The Manufacturers Association of Nigeria (MAN) advises Buhari to fast-track the Development Bank of Nigeria, which was announced by Goodluck Jonathan administration, in order to help make funds available for businesses in the category.
According to MAN, constraint to finance should be addressed through specialised funding windows with single-digit rates.
“Fiscal and non-fiscal incentives should be introduced to encourage MSMEs with high local content as well as encourage partnerships and linkages between large firms and MSMEs,” said MAN, led by Frank Udemba Jacobs, in a letter to Muhammadu Buhari, Nigeria’s president.
Owing to poor power supply across the country, many start-ups and MSMEs consume tens of litres of fuel and diesel to keep up their productive activities. This not only diminishes their growth trajectories but also affect their margins and capacity to create jobs.
“Many of them rely on alternative sources of power. Many MSMEs use smaller generators. If you move closer to them, you will hear lamentations on how much they spend daily on this,” said Muda Yusuf, director-general, Lagos Chamber of Commerce, in an interview with BusinessDay.
Apart from power, poor state of infrastructure and logistics such as transport services also affect MSMEs. Lack of reliable railway system makes transportation of goods difficult. Roads are often fraught with thieves as well as touts who pose as tax collectors. Some roads are still bad and inaccessible in many parts of the country.
Paul Collier, keynote speaker and professor of economics and public policy in the Blavatnik School of Government at the University of Oxford, told CEOs during the recent BusinessDay-organised CEO Forum that the best way Nigeria can raise revenue in this era of oil crunch is through infrastructure building.
“When government provides good infrastructure that will enable firms and people to cluster, people and skills are brought close to jobs. With this, government will have the opportunity to levy taxes and raising sufficient revenue,” Collier said.
This leads to the issue of multiplicity of taxes. Apart from overlapping of many federal government agencies, there are demands for numberless levies, taxes and other fees from them. Some of the levies demanded by some institution are already covered by other institutions or agencies. This cripples productivity, business expansion and job creation, according to Remi Bello, president, Lagos Chamber of Commerce and Industry.
What MSMEs need in the current dispensation is a clear-cut, deliberate policy, aimed at boosting their growth. Nigerian entrepreneurs are creative but they need regular electricity; they need finance; they need infrastructure; they need the convivial environment; but need not unfair environment, multiplicity of taxes, harassment by touts and insecurity. Start-Up Digest wishes Muhammadu Buhari success.
ODINAKA ANUDU