Improving potential of SMEs in export business
When small groups come together to discuss problems confronting sectors of the economy, some people write off such sittings as opportunities for few elites to unwind over tea, coffee and lunch. This is not always true.
Recently in Lagos, at the African Sustainable Export Solutions (ASSETS)/African Hub’s Dollars &Sense workshop held in Ikeja, efforts were made to shore up SMEs in the non-oil export sector of the nation’s economy.
Stakeholders and NAFDAC
Let us take one of the stakeholders and NAFDAC‘s case study. The stakeholder in question packages raw and unrefined shea butter 100 per cent from a couple of women’s cooperatives from Nigeria and Ghana (100 percent West African local content). The company has, to date, impacted positively on women who have been given shea-butter supplies responsibilities. How? Before their involvement with the company, many of them struggled to get by and often had to resort to backbreaking labour in order to supplement their income from growing subsistence crops like millet and groundnut.”
Diversification
The shea-butter company meets the criteria for diversification 100 per cent. It is not an import substitution categorised manufacturing company – it does not need to bring in any raw material from Europe, Asia or the Americas. But it has the local environment thorn on its neck. It has the NAFDAC troubling problem to contend with. The company raised the subject and NAFDAC was on hand to explain. How did it go? The spokesperson for NAFDAC spoke generally about SMEs who are scared to come to NAFDAC, who have incomplete documentation, who are non-compliant with labeling requirements. Then there was the talk about fees payable to NAFDAC by product manufacturers.
Ease of starting business/fees
According to NAFDAC, for Food local, it is N52, 500; for Imported food – N1, 042,200; for Cosmetics – N73, 750; for Imported cosmetics – N1, 063,500. Good enough the fees structure given here is designed to favour local production. But the prices listed are very far from the truth, said the shea-butter company and some other stakeholders who claimed they paid as much as N1.5 million. NAFDAC’s figures, some stakeholders claim, were ridiculously at variance with the fortune they pay to this government agency.
This writer corroborated the stakeholders claim with the case of a stakeholder who packages table water in Oriade Local Government Area of Lagos State. We therefore need not go far to find out why Nigeria scores poorly yearly in the World Ease of Doing Business Ranking. In 2015 and 2016 Nigeria ranked 170 and 169 respectively out of 189 nations ranked. For Starting a Business, which the issue under discussion properly falls under, Nigeria ranked 131 and 139 in 2015 and 2016 respectively out of 189 nations ranked.
And what was NAFDAC’s reaction? Its explanation was that middlemen that manufacturers go through are the problem. The straight point is that some bad eggs in NAFDAC hire middlemen to rip-off manufacturers. “This is the reason why the ‘Expedite Processes Unit’ has been created in the Director’s Office in Abuja,” according to NAFDAC’s representative at the event.
Need for house cleaning
It is clear here that NAFDAC needs to do some house cleaning. If this is the case with NAFDAC, will it not be right to infer that similar occurrence can be found in other government agencies that manufacturers deal with? This is a question for you to ponder. In any way, it is clear that there are ties up clearly with some of the hurdles: Lack of transparency; High transaction cost; Lack of institutional support.
FIIRO
Bolanle Oyedoyin, PhD, who spoke for Federal Institute of Industrial Research Oshodi (FIIRO) said the institute was established in 1956 to assist in accelerating the industrialization of Nigeria economy through research and development into food processing agro-allied, textiles, pulp and paper, ceramic and industrial raw materials, design and fabrication of machinery and equipment. And she gave a long list of Nigerian food and cash crop products that could be processed and exported. And this reminds one of AGOA opportunity which is begging for Nigeria’s patronage. And the singsong about diversification, you would want to remind me.
NEXIM and funding
NEXIM gave some good hope. Tayo Omidiji, head, strategic planning at Nigerian Export-Import Bank (NEXIM) spoke of N500 billion Non-Oil Export Stimulation Facility (ESF) aimed at boosting non-oil exports in Nigeria. The Central Bank of Nigeria (CBN) launched the facility not too long ago in partnership with NEXIM after concluding that inadequate financing was responsible for the drop in non-oil export revenues from $10.53 billion in 2014 to $4.39 billion in 2015.
Omidiji also spoke of N50 billion Export Credit Rediscounting and Refinancing Facilities (RRF) to support banks in their provision of pre- and post-shipment finance to exporters. The RRF will be implemented via a N50 billion debenture to be issued by NEXIM in line with Section 31 of CBN Act. These interventions will help to take care of ‘Difficult access to bank credit highly bureaucratic’; and ‘High transaction cost’ in the list of challenges SMEs face, if honestly managed.