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This article was first mooted in mid
2004, at the assumption of office by the incumbent Central Bank Governor
- Professor Charles Soludo. Its purport then was as it is even now, to sustain
public focus on the fledging macro economic development initiative of the
then out going Governor, better known as the Small and Medium Industries
Equity Investment Scheme – SMIEIS. |
Godfrey Ebetaleye |
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It was at the time borne out of apprehension for what would become of this initiative with the exit of the man whose brainchild it was, given our environment for what it is, with a penchant to dump existing programmes midstream for new ideas no matter how novel even when the previous ones were barely tried out.
You would probably not be far from correct if you said this piece, proactive as it was, was an idea whose time had not come until now. The effluxion of time between then and now has given the opportunity to observe the trend of events or non events bearing on this all important sector which now provides a basis for evaluating current paradigms and disposition of the apex bank to this all important scheme.
Personal field experience interacting with stakeholders in the SME sector indicates that of the several daunting challenges assailing small and medium enterprises in our clime, ranging from ailing infrastructures, socio-political instability, to issues about business ethics, managerial incapacity and the like, funding has acquired an uncanny notoriety as the foremost undoing of budding business enterprises, especially so when viewed from the entrepreneurs prism. It is now all too well known that the raison d'etre for the SMIEIS scheme was to assuage this canker. But the question remains, how well is the SMIEIS being tended to deliver on this objective? Has it been done outright or rather relegated to insignificance? Although this writer stands to be dissuaded, it would appear that the scheme has lost steam as the vigour and enthusiasm that characterised it at launch seem to have fizzled away as the years rolled by, notwithstanding the statistics reeled out by the CBN in recent times suggesting that the scheme is still alive and well with 42% achievement in terms of investment in SMEs vis-à-vis sums set aside by the banks. The question is, beyond this quarterly or so ritual, what else?
Unfortunately, this seems to have been the popular pattern over the years. A glance back memory lane coupled with the writers reading of the monetary authority's body language rightly or wrongly appears to lend credence to this perception. Successive administrations realising how key a success factor to macro economic development SME's are have experimented with disparate intervention mechanisms in order to prop up micro/small and medium enterprises – MSME's or small and medium industries – SMI's as they are variously called. The lists of past government initiatives include the following:
- Monetary policy on bank credit as a directional tool for channeling funds to needy sectors especially the real and SME sectors up to the period before deregulation in the mid 90's.
- The Small Scale Industries Credit Guarantee Scheme - SSICS
- Establishment of specialised financial schemes and development finance institutions e.g., Nigerian Bank for Commerce and Industry - NBCI, Nigerian Industrial Development Bank - NIDB now Bank of Industry - BOI, Nigerian Agricultural & Co-operative Bank – NACB, etc.
- Facilitating and guaranteeing external finance by the World Bank (including the SME I and SME II loan scheme)
- The National Directorate of Employment NDE
- Etc.
As with all of the aforementioned initiatives the real challenge has always been, feeling the direct impact of the policies on the target for whom such initiatives were intended and presenting real and demonstrable business case studies or success stories if you like of the end effect of these policies as a nexus to macro economic statistical data which to all intents and purposes count for next to nothing to the ordinary man on the street.
- The writer's concern that the SMIEIES initiative might be headed in the familiar direction of its predecessors, the continuing accumulation of SMIEIS reserves in banks balance sheets notwithstanding, is fueled by the following observations:
- In recent times the SMIEIS scheme seems to attract less and less attention of the CBN's helmsmen at least in public discourse. If any thing, the writers hunch is that this trend is a purveyor of what is to come. That is, a gradual ebbing away of this initiative from the public agenda and hence consciousness until it dies a natural death and before we know it, another idea is thrusted on us and SMIEIS becomes history. This has to do with the body language alluded to earlier.
- Secondly, in order to complement the SMIEIS scheme, especially as regards the generation of viable value propositions by intending entrepreneurs, the Central Bank had created a website – www.smi-nigeria.org - and populated it with several research output by consultants from universities pan Nigeria detailing viable business ideas in each institution's catchment areas. For quite a while now this website has been off the world wide web. One would have thought that this all important website would be continually updated and the entrepreneurially minded Nigerian public sensitised to its existence, since it was meant to provide a ready reference to budding entrepreneurs who probably had the wherewithal to start up in entrepreneurship but didn't have the faintest clue of what to venture into. Again the talk about body language comes to play here.
- The banks have continued to be circumspect about the scheme as they were at the inception. Understandably so, on account of the peculiar risk complexion that SMEs present to the industry, given their acclaimed morbidity rate the world over. To this, a credit guarantee scheme ostensibly to be championed by the monetary authorities was widely touted at some point as a possible panacea to assuage these apprehensions. Unfortunately, this has remained a pipe dream. And so you have the banks continuing to stack up SMIEIES reserves. Interestingly none of these banks have been found errant in meeting the SMIEIS investment benchmark, at least none is known in the public domain to have been sanctioned for not complying. Therefore, you have a situation whereby the scheme is gradually becoming one of those moral suasion mechanisms rather than a definitive macro economic policy compelling strict compliance by all concerned, by wielding the carrot and stick.
- The banking sector reform, at least the consolidation phase was hailed as portending the generation of significant critical mass for the banks to provide propulsion for economic growth in making available investible finance to needy corporates nay SMEs, for serious business which their size previously did not equip them to do. Rather than this however, the writers observation of emerging trend has been that banks are increasingly focusing on personal finance for domestic/private consumption rather than finance for investment by SMEs to generate waves of wealth creating cycles. And so what you get is that banks are all over the place falling over themselves to grant consumer credit especially to workers in the so called reputable companies to finance acquisition of consumer goods, such as; television sets, gas cookers, fridges , cars, etc. Good as this is, the fact remains that this trend does not foster capital accumulation that provides propulsion for industrialisation and economic growth. If anything, it only reinforces our consumerist disposition. A development that only serves to further enmesh us in the ilk of consuming nations who cannot produce anything by themselves because they do not accumulate capital, but have a large appetite for importing and consuming, a tell tale sign of underdevelopment and other uncharitable descriptions of us such as LDCs (Less Developed Country), HIPC (Highly Indebted Poor Country), etc, by the multilateral organisations. Herein lies one reason why the CBN must reinvent the SMIEIS scheme.
As for reinventing the SMIEIS scheme, the SMIEIS Guidelines of June 19, 2001 actually provides among others things for a review of the scheme after 5 years, apparently for stock taking on progress recorded so far and in order to chart the future course of the scheme. Although one reckons that it is still early days beyond the due date for this review which was earmarked for 2006, per the aforementioned guidelines, it is hoped that when this review happens in due course, the scheme would be given a new lease of life coupled with a rekindled enthusiasm in the scheme by the monetary authorities themselves in order for the scheme to deliver on its lofty objectives.
While admitting that there have been some internal re-alignments of relevant units within the CBN such as the transformation of the erstwhile Agricultural Finance Department to Development Finance Department invariably to position this unit to square up to the challenges of the SME sector among others, it would appear that a lot more still needs to be done, especially at the level of inter governmental agencies' collaboration amongst themselves. At this juncture one is tempted to suggest that all relevant government agencies or sub units therein whose mandate is tangential to the development of the SME sector should begin to collaborate as a basis for building synergies across board, rather than the current situation where each is playing an island onto itself and jealously guarding their territories. It goes without saying that, there is scope for these government agencies to share ideas with each other without the one being necessarily subservient to the other.
In this connection, one sees possibilities in the Central Bank of Nigeria 's Development Finance Department working closely with the Small & Medium Enterprises Development Agency – SMEDAN and the Federal Ministry of Industry's Small & Medium Industries Department. These are all agencies of the Federal Government that are currently doing their separate thing without recourse to or comparing notes with the other with the resultant duplicity of efforts that yields insignificant impact. One might ask, what is the input of the Central Bank of Nigeria, the Federal Ministry of Industry, Bank of Industry and other key stakeholders into the much anticipated SMEs policy being pushed through by SMEDAN?. The negative effect of uncoordinated actions by these all too important agencies of government in achieving macro economic developmental goals can only be imagined.
And lest I forget, whatever happened to the accumulated SMIEIS reserves by banks that have long exceeded the term allowed for their investment in SMEs?. Was the CBN not supposed to evolve a mechanism for dealing with these long overdue but uninvested SMIEIS reserves by banks?
Finally, one can only hope that now that the consolidation phase of the banking sector reform is over and the banks are now operating on an even keel, the next phase on the reform agenda will have the SME's well covered and see the CBN beginning to give full vent to the dictates of the SMIEIS policy. That way the maximum effect of the scheme, which is to grow the productive base of our economy, generate employment, further reduce inflationary spiral, and ensure a healthy balance of payment position, would be secured. These are all cardinal objectives of effective macro economic management which will place the economy on the trajectory of realising the much touted UN millennium development goals – MDGs by 2015 and ultimately be numbered among the top 20 by 2020 vision.
Article by: Godfrey Ebetaleye, a business consultant in PricewaterhouseCoopers. Opinions expressed in this article are strictly those of the writer.
