‘SMEs can only survive recession with better business environment’

Degun Agboade is the president of Nigerian Association of Small and Medium Enterprises (NASME) and CEO of Orfema Pharmaceutical Industry Limited. He is an entrepreneur with over 25 years experience. In this interview with John Omachonu and Josephine Okojie, Agboade spoke about what the government should do to ensure SMEs survive recession.

What has been the effect of FX deregulation on SMEs?

Most of the challenges entrepreneurs and owners of small businesses face in the country are very obvious. A lot of SMEs are not really exposed to FX. Only few are. The biggest of it is the foreign exchange scarcity, which has seriously hit the pharmaceutical industry- where 99 percent of the raw materials are imported.

Government took the decision to deregulate when we had no alternative. Currently, it is not making the right impact because the government jumped into it. The 60 percent FX the government promised to give to manufacturers is still a ruse; nothing has changed because manufactures are still not getting FX. I have made three applications currently with the banks to get FX. One of my applications is up to six months.

What should the government do to address the situation?

They need to protect the local industries by putting searchlight on the banned items and ensure enforcement.

They should also carry the private sector along because they are the ones that are been affected, and in addition promote the patronage of Nigeria products so that SMES can sell their products. This is the method Indian adopted and today, a lot of industries are doing well. The government must ensure also that the importation of any commodity that can be produced here is banned, to guarantee a market.

How are SMEs surviving recession?

It has really been tough because the business environment has become even tougher. As said earlier, SMEs need a guarantee market to sell their products; with this, they can survive the current economic situation. The government needs to also look at taxation, which is critical for our survival as well. How can small businesses be paying their taxes with same tax structure that is used for big firms? This is very wrong and we at NASME are calling for only taxation on profits for SMEs and we have a new template, which we have given to the government. We are glad that the government will be changing all that now with the new tax law they are proposing. Tax accrued in the past should be written off so that the government can achieve a lot of compliance with the new tax law.

Finance is one of the biggest challenge SMEs face, what is NASME doing to address this issue?

At NASME, we are addressing the issue of finance and other major challenges small businesses suffer through advocacy. We are advocating and dialoguing with the government so that a solution is found as regards funding businesses. Finance is one of the major challenges SMEs face and this is also one of the impediments to their growth.

Most business cannot easily access funds because of the stringent requirements and high interest rate.

The issue of interest rate is another big problem. Hardly can you get any money with an interest rate below 23 percent from any money deposit bank in the country.  With interest rate as high as that, businesses cannot do business and still make profit. In developing countries like India, SMEs get loans at an interest rate of four percent for 5 or 10 years from banks.

Recently, about 222 SMEs shut down operations, what should the government do to ensure that the businesses start operating again?

To get these businesses back to operation, the government should address some of the issues that led to their closure in the first place. They must ensure a better business environment so that we can survive and provide cheaper funds for us.

It is not a laughing matter to be an entrepreneur in this country. The environment is very hostile. Government is not doing what is supposed to, and finance is not there. In other countries, government makes it easy for entrepreneurship to thrive. But the case of Nigeria is different. As an entrepreneur, you have to provide your own power, water, and legal framework.

Why is it that SMEs cannot access government funds despite numerous windows meant for them?

We have about 13 or more windows created by CBN, and only few of us can access the windows because the requirements are too stringent and the transmission mechanism is faculty, and if something is not done soon and fast, then the efforts of the government to create these windows would be in vain. We need cheap funds that can be easily accessible with single digit interest rate. This makes our products to compete favourably against imported products.

Government is talking about diversification, what role can the SMEs play in this process?

Diversification cannot take place if the people in power fail to provide key infrastructural facility that can create an enabling environment for business to grow. Improve on the easy of doing business in the country, empower start-ups through training and mentorship and give them funds to start a business. Government should ensure entrepreneurship trainings for youth right from the university and identify those that have good business skills and ensure they are empowered to take the ideas further.

What should Buhari led government do for start-ups and MSMEs?

His government should provide an enabling environment for businesses to survive and grow, and provide loans with single digit interest rate. We need incentives. There should be policy incentives to encourage the private sector to provide training, mentorship and funding for start-ups. Start-ups represent great investment opportunities when they are de-risked through training and mentoring. SMEs are the engine for economic growth, so the sooner the government strengthens them, the faster the country will attain inclusive growth. The government is currently doing a lot of programs for SMEs. We want to be more involved in the programs that concern us so we can tell the government where the shoe pinches us. The government should re-capitalise BoI so that they can do more. If you look into their record, activities that the bank has done for 5 years ago are being done in a year now in terms of new portfolio and giving support to people.