Dear Mr. President,
After comparing notes with other small-scale entrepreneurs, and based on media information on Nigeria’s current economic challenges, I decided it would be unpatriotic of me not to openly share the views below with you. First, I need to state that I am fully aware that our leaders at all levels, and especially you, Mr. President, know a lot about the current incidence of deepening and generalized poverty in Nigeria. I do not, therefore, wish to distract you with quantitative statistics on the pernicious socio-economic realities in the land. However, I will volunteer two fairly straightforward data, one of which you must already know, since it was released to the media by the Federal Bureau of Statistics nearly 4 months ago. The Bureau announced that 112 million Nigerians (out of an estimated 170 million) live in abject poverty.
The second datum, based on my own informal, qualitative ‘research’, reveals as follows. After casual interviews with 22 small business owners in six locations, including Lagos, Abuja, PH, Ibadan and Ilorin, I have come away with the information that over 70% of Nigerian SMEs are constantly under threat of collapse. A higher number – about 88%, actually fold up within their first 18 months
Typically, they owe, or are behind in staff salaries, owe debts to friends, relations and micro-finance institutions (who charge 10% interest per month, since Banks are reluctant and extremely slow to lend to small businesses). They also reported challenges with managing and preventing fraud and sundry malpractices, alongside an incredibly poor administrative and work ethos among many staff, workmen and artisans. Wish only these were all the plights of Nigerian small businesses, Mr. President. But please stay tuned.
Some of my interviewees say that some younger generation staff have virtually no idea of workplace culture and contract, and are very low on a variety of cognitive and verbal skills. So, while small and medium enterprise (SME) owners are trying to create employment, they are realizing that an increasing number of youth are not just unemployed, but may also be unemployable. Consequently, SME staff turnover is high, destabilizing their work rhythm.
The key question is how should the country tool up, orient and prepare its youth for the workplace? An even more disruptive enemy of enterprise was cited – Government, along with its agencies. The hostility of this anti-enterprise enemy, they reported, varies across the different States of Nigeria.
Those States in particular that claim to pursue an ‘aggressive revenue drive’, are vastly more successful at disrupting and undermining SMEs before the latter have a chance to become commercially viable and stable. One of my interviewees wondered why a government that promises all sorts of incentives to foreign investors cannot allow a full year of freedom to its SMEs from taxes, levies and countless State and local government ‘approvals’, so that they can stabilize a bit before discharging their tax and other statutory obligations. The current situation puts start-up SMEs under enormous pressure at their most vulnerable period, despite existing laws to prevent this sort of experience. Some local government functionaries (sometimes in collusion with touts) use these unwieldy levies and approvals to blackmail new businesses and extort bribes.
Almost half the time and energy of a start-up entrepreneur is spent fighting off, responding to, or negotiating with ‘business attackers and blackmailers let loose by government on any Nigerian stupid enough to invest in the SME sector…’ to quote a newly-started SME operator. In some States, these ‘enterprise attackers’ can number more than a dozen agencies!!
Please bear in mind, Mr. President, that on average, SMEs create far more employments relative to funds invested than big investors – local or international. A recently retired friend has invested just a little over N100m across two small businesses, but employs 30 staff. Assuming half a million such SMEs survive, and each creates 10 employments over 3-years, that will add up to 5 million new income earners and consumers – every three years. If we continue to squeeze so many SMEs out of existence, we are economically stabbing ourselves in the heart.
At the risk of stating the well-known, Mr. President, I should remind you that in the BRICS group of countries, between 55% and 80% of employments are generated by the SME sector alone. Apart from the huge number of jobs it creates, a viable SME sector serves as the foundational economic base to support and service the big investors and industrial manufacturers.
Large, multi-billion investors won’t come to Nigeria if they do not see a large number of successful and technically competent SMEs to supply them locally with the small tools, spare parts, nuts, bolts and various other services and semi-fabricated inputs they require to produce at internationally competitive cost. Big international investors move to developing countries to avoid the high-costs that go with the high-quality services and skills in the advanced economies. They want locations where they can get an abundance of high-quality, intermediate services and input at relatively low cost, which are the hallmarks of a viable SME sector. If they cannot find that in Nigeria, they won’t invest here, except, of course, in the bountiful business of oil and gas, which is a low-employment sector.
Oh yes, Mr. President, just how can I forget to mention Nigeria’s most aggressive enemy of enterprise – PHCN/NEPA? My interviewees expressed some of the most dramatic sentiments on this enterprise-destroying government entity. One female entrepreneur, whose business was experiencing its last gasps for life, declared, with bitter emotion. . . ‘Government has unilaterally declared war on small businesses in Nigeria, and unfortunately, it’s winning its unilateral war, while small businesses are dying week in, week out, and the unfortunate employees fall back into unemployment and poverty….’
Another angry entrepreneur I spoke to is currently working out the logistics of selling up and relocating his business to Ghana. In other words, a frustrated Nigerian entrepreneur is about to ‘dis-employ’ Nigerians and relocate to employ Ghanaians!!. Not only did I fail to persuade him to reconsider, he actually invited me to also consider that option, which some Nigerian SMEs are increasingly taking. In a statement that continues to inject fear in my mind, he added, ‘Nigeria is fast becoming a burial-ground for SMEs..‘ Similar dark sentiments are common among failing and frustrated SME owners who, after sinking in their resources, have to contend with the obstacle course of doing business in our country
This is why, Mr. President, I strongly appeal that you initiate, with the utmost urgency, a national programme to promote, defend and deliberately enable Nigerian SMEs to survive and thrive. Please use that sector as the arrowhead for a production and enterprise-driven economic transformation of Nigeria. The large investment sector cannot and will not stand without SMEs doing well in the background.
Working with other entities, please lead a massive effort to: a) build an SME-driven base or bottom layer within Nigeria’s socio-economic pyramid, which will in turn produce a critical mass of lower and middle-class consumers, expanding steadily upwards; b) develop a critical mass of SME-driven, technical and artisanal know-how, with structured capacity building and an R&D sub-sector, to innovate and deploy small and intermediate technologies in response to commercial and business necessity at SME level; c) aim to facilitate the establishment of at least 500,000 micro, small and medium businesses, which can grow rich and gradually pay middle-income salaries, to millions of Nigerians, thereby enhancing expansion of a middle-class consumer population. d) set up an institutional process and instrument to pursue objectives a – c above, with strong participation of international entities, such as UNIDO, World Bank, Fair Trade, relevant UN agencies, SME support institutions, etc, who should lead and report to you on strategy-setting, fund-administration and implementation monitoring.
Mr. President, a solid SME sector is our first step in the journey from a pre-industrial to an industrial economy. Government already has an omnibus array of poverty-reduction, SME and employment promotion agencies and projects. Please rationalize and integrate them into two or three issue-focused, specialist service providers or units within an over-arching national SME-sector development initiative. This letter is not a programme implementation document on how to fund such an idea, or its operational modality, or even how to prevent possible abuse and money hand-outs under such a programme. Detailed elaboration work should be undertaken by relevant government and private sector experts.
Within half a decade, we can build a critical mass of viable SMEs to roll back pervasive poverty and expand our miserably small population of middle-class consumers. We can slow down and eventually reverse the explosion of violence in our society, whether actively fuelled by politics or resulting from deepening socio-economic anomie. To signal that we seriously intend to fulfill our larger Vision 20: 20-20 ambition, we must first demonstrate that we can build a technically strong and viable SME economy.
Since our Banks seem only able to support SMEs with legally secured collateral in landed property or similar assets, Government must find another way to facilitate the establishment of more than half a million thriving SMEs within a decade. Otherwise, only less than 5% of Nigeria’s working-age people who possess property or other asset legally acceptable to Banks can become entrepreneurs in the formal sector. That leaves millions of enterprise-minded youth and other Nigerians who have no collateral outside the loop of national wealth creation.
Development of the SME sector should be seen as Nigeria’s best hope for positive economic transformation, and should be pursued with deliberate and drastic action. As you already know, Mr. President, outside the income from oil and gas, there are vastly more streams of income and wealth, and tens of millions of jobs, waiting to be realized in other sectors, not least the agro-allied. Some analysts have argued that Nigeria has less than one-tenth of the wealth it could generate, with oil and gas revenue being a tiny fraction of our potential wealth, if we industrialize.
Finally, Mr. President, I am tempted to recall that almost six years ago, while you were Bayelsa State Governor and I was in the employ of an oil company, I had accompanied you on a visit to the famous Songhai Centre, Republic of Benin, during which you expressed views similar to some of the points raised in this letter. After seeing the marvel of technical and agro-allied innovation at the centre, and the hundreds of skilled employees processing and packaging food for export, you led all of us in a brief discussion over lunch of how the strategy behind that model could be implanted in your State and across Nigeria. I have no doubt that your views on the transformational potential of the SME sector on that occasion remain your views now.
If you conquer Nigeria’s stubborn power problem, and fully unleash the wealth-creating and poverty-fighting power of the SME sector, your leadership record will rival even those of Nigeria’s founding fathers. That opportunity is yours, Mr. President. I strongly believe you can grab it. I humbly propose you should.