MSMEs as Catalysts for Economic Recovery

As the country marked the World MSME Day 2020, James Emejo writes that micro, small and medium scale enterprises have received unprecedented attention from policy makers who more than ever regard them as critical mass for economic recovery and growth amidst the devastating impact of COVID-19 on virtually all spheres of the economy

Over the years, MSMEs have barely struggled to gain recognition from both the

government and private sector particularly commercials banks who regard them as too risky for credit financing.

While the government’s rather lukewarm attitude towards the sector was evident in the way it budgeted annually for the sector and underfunded relevant public agencies charged with the responsibility of administering the sector, the commercial banks often see MSMEs especially those in the agricultural sector as unreliable, undocumented as well as lacking capacity for business development and sustenance and too risky for their support.

Coupled with the high cost of borrowing in the economy, the sector is largest left to its fate as operators seek scarce funding alternatives to make a living amidst rising unemployment and poverty.
Yet, MSMEs are globally celebrated as the fulcrum of economic growth and having the capacity to create millions of jobs for the teeming population.

The sector constitutes over 90 per cent of all businesses in the world and account for about 70 per cent of total employment and 50 per cent of Gross Domestic Product (GDP) globally.

A recent survey conducted by the National Bureau of Statistics (NBS) in conjunction with the Small and Medium Enterprise Agency of Nigeria (SMEDAN) further demonstrated that the MSME sector accounted for about 76 per cent of the labour force and contributes about 50 per cent to growth.

Yet, little attention had been paid to the all- important sector by past administrations.
However, with increasing poverty and unemployment for millions of graduates from tertiary institutions on annual basis as well as rising rate of criminality in the society, it soon became clear that it was only a matter of time before the situation degenerated into a full blown anarchy if the government does not stop paying lip service to the development of the sector.

Until recently, there had been laudable initiatives by the Central Bank of Nigeria (CBN) towards deploying monetary policy to improve financing opportunities for small businesses in the country.

The apex bank had on several occasions deployed instruments to encourage deposit money banks to lend to the private sector particularly MSMEs who operate in the agricultural sector even as the government look to diversifying the economy from the perils of oil.

More than anything else, lack of financing opportunities were identified as major constraints to the development of MSMEs in the country.

SMEDAN has also been a critical institution for the repositioning and empowerment of the MSMEs sector in the country, through effective administration and facilitation of financing opportunities for small businesses with huge successes in recent times.
There is however no gainsaying the fact that 2020 represents golden year for MSMEs, in terms of the credit opportunities and attention accorded to small businesses by both government and private sector amidst the economic hardship and distortions caused by the outbreak and spread of the COVID-19 pandemic in the country.

With vulnerable macroeconomic indices for the country as well as knockdowns put in place to check the spread of the deadly virus, which had affected the operations of multinationals and other high revenue companies, the dramatic drop in global oil prices among others, it became inevitable for focus to be shifted on small businesses in other to provide some sort of relief in form of palliatives and other interventions to stabilise the economy which had is already on the verge of another recession.
Among other things, the CBN in collaboration with critical stakeholders including SMEDAN had launch a N50 billion COVID-19 intervention fund to small businesses and households at single digit to enable them cope with the impact of the pandemic, a development which is unprecedented in the history of intervention support to MSMEs in the country.

Speaking during a recent web conference organised to commemorate this year’s World MSME Day, themed:”COVID-19:Great Lockdown and Impact on Small Businesses”, Minister of State for Industry, Trade and Investment, Mrs. Mariam Katagum said the sector plays a pivotal role in stimulating economic growth and providing employment to vulnerable groups including as the youth, women and the poor.
She said this realisation informed the commitment and sustained interest of the President Muhammadu Buhari’s administration in repositioning the sector for efficiency, growth and development.

The minister noted that the COVID-19 pandemic had brought severe adverse economic shocks all around the world as businesses had witnessed supply chain disruptions and low demand for products and services, which in turn have resulted in substantial revenue loss.
She said this had further complicated the challenges of the vulnerable MSME sector, making it one of the most adversely affected by the economic fall-out of the pandemic.

Nevertheless, she noted that the federal government had continued to explore interventions to cushion the effects of the economic downtime, especially on small businesses by providing palliatives to enable recovery, sustenance and improvements.
She listed the interventions to include the ongoing implementation of the CBN COVID-19 Targeted Credit Facility (TCF) intervention fund of N50 billion as a stimulus package to support MSMEs and households; granting of three months moratorium for repayment of all government loans; and through the N2.3 trillion Economic Sustainability Plan (ESP), where government is planning to implement the Guaranteed Off-take Scheme and the SME Survival Fund.

She stressed that these interventions have been designed to guarantee recovery and ensure stability of businesses within the immediate, short and medium terms.

Katagum added that no country can develop its economy without concerted efforts to facilitate private sector participation, financing and improvement in social services delivery.

She said:”The Federal Government of Nigeria ensures that policies and programmes towards MSME development are deliberately crafted to yield the desired output of MSME growth and development.

This makes the ongoing review of the National Policy on MSMEs imperative as it will take cognizance of innovation, harmonisation of MSMEs categorisation, as well as accommodate other reforms that have taken place in the sector over the last five years.
This is with a view to providing a robust framework that would enable stakeholders in the ecosystem make informed decisions on interventions and business planning, among others”

Also, on his part, the Chairman, SMEDAN, Mr. Femi Pedro, said the government had been quite impressive in the manner it responded to the spread and threat of COVID-19 on small businesses in the country, adding that a lot still needed to be done nonetheless.
He said: “We have done quite well in addressing COVID-19. However, the impact is yet to be fully felt by the myriad of MSMEs in Nigeria. I hope as we move forward, we will be more creative, more focused in touching the lives of so many small businesses.
“Even as chairman of SMEDAN, I get calls every day from MSMEs asking me what we are doing to alleviate their problems. And I always assure them that it is work in progress.Yes, it may not reach you today but stay with us and as time goes by we will be able to reach you and make lives a lot easier for you.”

Also speaking during the webinar, Director General of SMEDAN, Dr. Dikko Umaru Radda said ongoing conversations on current and post COVID-19 economic challenges and survival strategies are crystallised around MSMEs.

According to him, with recent developments, occasioned by COVID-19, MSMEs have proven their worth as a stimulus subsector adding that “They have become well-recognised as the bedrock of economic growth. They present a vital platform for boosting technical, technological and entrepreneurial capacities amongst the most vulnerable of the society. They offer opportunities to drive jobs and wealth creation as well as income re-distribution within society”.

Radda noted that as the agency of the federal government saddled with the responsibility of facilitating the development of the MSMEs subsector, it is currently in collaboration with ministries, departments and agencies (MDAs) of government to have jointly/severally provided innovative solutions to re-position the sub-sector during and after the lockdown using the existing intervention support programmes.

He stressed that the federal government in its effort to contain the impact of the pandemic on small businesses have strategically rolled out the following strategies including payroll support, low interest loans without prescribed collateral from small businesses, guaranteed off take of MSMEs product and services and loan restructuring with adjusted moratoriums.

Specifically, he noted that the apex bank had rolled out the N50 billion palliative for MSMEs in addition to the ongoing Agribusiness/Small and Medium Enterprises Investment Scheme (AGMEISIS) intervention.

The DG emphasised that the new national policy on micro- small and medium enterprises (MSMEs) currently being put in place by the agency and other stakeholders in the sector will create a minimum of 41 million jobs within the next three years, stressing that the proposed framework will further facilitate an enabling environment for small businesses to function at maximal capacities.
He argued that the multiplier effect a healthy business environment will allow the MSMEs create to boost employment opportunities in the country, noting that the performance and wellbeing of the enterprises are largely dependent on the existence and implementation of a functional national policy on MSMEs.

He also urged the CBN to reimburse the COVID-19 fund, to accommodate more MSMEs, noting that while the current lockdown had persisted, no one knew how long it would last going by the increasing numbers of new infections.
However, he said the agency had executed several programmes aimed at ensuring that MSMEs are developed as well as contribute their quota to Gross Domestic Product (GDP).

He also said the agency’s sensitivity to the plights of small businesses during COVID-19 led to a recent decision to extend the moratorium on loans administered for the development of the MSMEs sector by one year.
He further commended the resilience and positive attitude of MSMEs amidst the pandemic, noting that this had kept the national economy alive compared to what obtains in other countries.

UNIDO Representative to ECOWAS and Regional Director, Nigeria Regional Office Hub, Mr. Jean Bankole also told the virtual audience that the new normal called for collective efforts to enhance the resilience of MSMEs in a sustainable manner, adding that organisation is committed to strengthening the growth of the sector in Nigeria in particular through ongoing cooperation between the federal government and UNIDO and country programmes implementation which promotes MSMEs and private sector development.

President and Chairman, National Association of Small and Medium Enterprise (NASME), Prince Orimadegun Agboade said small businesses were the hardest hit by the pandemic adding that the unprecedented knockdowns enacted by government to curtail the spread of the virus had disrupted business supply chains among other effects which include damages to agricultural products.

He said:” Today’s unprecedented crisis will require unprecedented response from the government and public sector. We need to thank government because we have never had it so well with the attention that government is giving to MSMEs. It has never happened. This is unprecedented attention. Also, MSMEs business clinic has been unprecedented: government has tried in these areas as most of our members’ problems were solved or about being resolved.”

He, however, said though the CBN COVID-19 intervention fund is commendable, it is too little to meet the needs of the numbers of small businesses and called for reimbursement of the fund by the federal government.

However, analysts also believe that small businesses have a responsibility to justify the improved financing opportunities that they have enjoyed from the government by profitably channeling the resources to boost domestic out and create jobs going forward.