By Udeme Clement

As the new government continues to review activities in various sectors of the economy, operators of Small and Medium Enterprises (SMEs) are calling on President Muhammadu Buhari to save the SMEs sub-sector from total collapse. Some economic experts and entrepreneurs who spoke with Sunday Vanguard lamented the rapid decline in industrial activities in Nigeria and increasing number of SMEs closing shop regularly.

The Chairman, Toiletries and Cosmetics (T&C)group, Manufacturers Association of Nigeria (MAN), Mr. Ikpong Umoh, calls on the President to beam his search light on the activities of regulatory agencies, duplicating their functions, over regulating SMEs by imposing multiple taxes and high charges on them.

The current growth rate reveals that manufacturing contributes only between 5 and 6 percent to Gross Domestic Product (GDP). What is fundamentally wrong with this sector?

Frankly speaking, everything is wrong with the industry, from poor infrastructure to high lending rate and hostile operating environment. One of the problems killing SMEs now is exploitation by regulatory agencies. For example, over 130 manufacturing companies, mostly toiletries and cosmetics closed shop in Nigeria in the past few years. It should be noted that SMEs have enormous potentials to create jobs, and to reduce poverty. A vibrant SMEs is what makes China, India and Taiwan to become the Asian Tigers. Nigeria can achieve noticeable economic growth through deliberate policies to empower our SMEs to flourish.  That is why we are calling on Buhari to rescue SMEs.

In trying to revamp the sector, the President must have wider consultation on policy intentions for SMEs. We want to see a change from the practice of the past where government consulted with only the multinational-hijacked Organised Private Sector (OPS). He must be wary of advice from some members of OPS, who are giving government wrong information about activities in the sector on job creation and brandishing fake capactiy utilisation figures to cuddle favour for themselves and their firms. Their wrong advice contributed to why the previous government efforts in revamping the economy failed. They are very active now trying to get into government as advisers on industrial policies. Their target is to deceive government to maintain the status quo where SMEs are oppressed, short-changed and continue their decimation agenda for market advantage, while courting favour for a few companies within their group.

What gives you the confidence that Buhari can salvage the situation?

Judging from his inaugural speech, he gives us hope about moving the economy forward.  The best way to develop our economy is to revamp the manufacturing sector. Our agenda for him is to look critically at all factors militating against the survival of our industrial sector. These include unbridled importation of goods that can be made here, excessive taxation, anti-trust activities and overbearing regulation.He should beam his search light on activities of regulatory agencies, whose activities instead of acting as enablement for SMEs have over the years been slowly decimating the sector.

There are so many regulating agencies  duplicating each other’s functions, devising more frameworks to generate revenue for themselves. In the process, existing SMEs are being over regulated through imposition of multiple taxes. Nigeria has one of the harshest regulatory environment in the world as shown by IFC ranking, which placed Nigeria 147 among 189 economies measured in the report entitled, ‘Understanding regulation for small and medium  size enterprises’. The President must address this self-inflicted wounds under the guise of regulation by reorganising these numerous agencies, merging those currently doing similar functions and funding them from tax payers money, as it is done in all progressive countries.

What precisely do you mean by creating enabling environment for SMEs?

This means giving SMEs access to loans to fund industrial production. The current high interest rate of over 25 percent must be brought down. There are institutions that have free funds, such as the Central Bank of Nigeria (CBN), commercial banks, insurance companies and even regulatory agencies that are killing SMEs with high charges. Such funds must be given back to SMEs, to increase productivity in the economy. He must tackle corruption in Civil Service, the ports and government parastatals. All raw materials with no local substitute must have their duties.

As a stakeholder in the industry, what pragmatic steps will you advise the new government to take in resuscitating manufacturing?

Government should adopt a bottom-up approach in economic policies. Our economic strategy over the years from 1968 had been made and celebrated in Abuja or Lagos, following a top-bottom approach. This approach contributed to the crisis in the economy and must be reversed to bottom-up approach, for economic policies to be anchored at the grass-root where local government councils must be actively involved. Such bottom-up approach will stem rural-urban drift to get jobs, and will also boost industrial activities across the country. For example, Toiletries/Cosmetic group of SMEs has low entry points and the size depends on the owner.

When we started15 years ago, the start up capital was N3,000 and today, such industries employ thousands of people. Soul-mate and Emos-best, located at a valley in the East are among such industries.    Local government must be actively involved in creating jobs, nurturing SMEs to grow and establishing new industries, not just collecting taxes from SMEs that are struggling to survive. No tier of government must talk about taxes without creating enabling ambience for industries to grow.

Government must restrain regulatory agencies from pretentious antics of labelling locally made goods as fake and sub-standard in attempt to impede their growth and draws “blood revenue” that is killing local industries. Agencies like Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Bank of Industry (BoI) and the CBN must all have desks in local government councils for people who want to be involved in industrialisation to access them. This is what obtains in China, Singapore and other industrialised economies, because in advanced countries people are encouraged to get involved in productive activities to create jobs.

The immediate past government emphasised so much on Foreign Direct Investments (FDI), yet Nigeria’s economy is still in crisis. As operator of SME, how do you think Buhari should handle the issue of FDI?

He should resist the temptation of focusing on FDI to the detriment of SMEs because that has been done since 1999. He should focus on SMEs for industries to spring up all over the country. He should give each local government a target of creating minimum of five industries in every three months, based on raw materials available locally. If that happens, the foreign investors will be those running to Nigeria, and government will give them conditions. Not what is happening now, where they come and get involved in goods and services that SMEs and ordinary Nigerians can handle.

Instead of building factories to engage Nigerians in industrial activities for job creation and technology transfer, they run super markets, barbar’s saloon, laundry and other services. Nigeria should take a cue from China where foreigners are restricted from certain businesses. In China, Nigerians are not allowed to be involved in exports of Chinese made goods to their home country. In India, foreign firms are not allowed in retail end of their economy. Retail business is exclusively  reserved for Indians who run the “Kiranas” ( corner shops). Put together, they employ millions of Indians of every adult age.

Why is our government not putting restriction on services that Nigerians can render? 

This is the question everyone is asking. That is why we are calling on Buhari, we believe is transparent to come to our rescue.Their target is to kill our local industries.That is why, before they come here, they give government conditions to operate on global listing licence, which allows them to import whatever materials or goods they want to sell into the country. Today, about 96 percent cosmetics in Nigeria are foreign.

These foreign investors deliberately refused to buy local materials. If government withdraws this global listing licence, SMEs will improve because the foreign firms will buy local materials. The issue of local products being substandard is not true, because these products are well cherished by the Nigerians consumers, in addition to being tested and confirmed good by NAFDAC.

Today, we have many regulatory agencies all targeting SMEs, such that the industry is over regulated. NAFDAC is there and its regulatory fee is very exorbitant. NAFDAC uses Good Manufacturing Practice (GMP) to regulate the industry. Now Standards Organisation of Nigeria (SON) is also targeting SMEs. They are doing the same thing NAFDAC is doing, but giving it a different name (MANCAP). SON is demanding SMEs to pay about N600.000 as  service charge before importing machines to expand their manufacturing operations under the guise of issuing SONCAP imports permit.

This machine that is not available locally and the same SON does not have a standard for this machine. Due to this oppressive charge, some of our members have not been able to expand their operations in the last five years. Who’s interest is SON serving? We import goods through the sea port and pay duties to Customs, but SON, NAFDAC and other agencies are also at the seaport. What are they doing at the port? Are they saying that Customs officers are not well train to carry out examination of goods at the port? All agencies that have no business at the nation’s port other than drawing revenue under any guise should leave the port and allow Customs to do their work.

Government should put measures in place to streamline the activities of regulatory agencies. That is why we are calling on Buhari to save the industry because the agencies have become revenue generators from small scale industries they ought to nurture to grow. Again, government should remove immunity from regulatory agencies. If they have the right to sue SMEs, we must also have the right to sue them without any preconditions.

This will check their excesses and abuse of their mandates. Government should stop SON from issuing import permits on chemicals because NAFDAC is doing that already.  Lagos State Environmental Agency (LASEPA)is talking about chemical storage permit, which is duplication because NAFDAC’s chemical permit covers storage as well. Also, SON has no right to issue permit on machinery because they don’t have the standard. Standards reside in the industries and not one crafted as a regulatory framework.

We in T and C manufacturing group  of MAN believe that SON is acting beyond its mandate and acting surreptitiously to prevent SMEs from bringing it machinery to make products that can compete effectively in the market place with the multi-nationals. Arbitrary increase in fees by agencies must stop. They should follow due process of regulation by letting stakeholders know beforehand the rational behind such increase.  Clean Report on Inspection and Production (CRIP)now required by NAFDAC on industrial chemicals from China must be jettisoned, because NAFDAC already has well established laboratories here to test materials. We see this as another attempt to kill SMEs.

Billions of Naira had been approved as intervention funds for SMEs. How come many industries are still going under despites the bailout?

I do not know about any SME in T and C group that has benefited from such intervention funds.  Let those in charge of the money publish the names of companies that collected the money for Nigerians to know, because the real SMEs are suffering.  We know Buhari as a transparent person. He should ensure transparency in all departments of government. Agencies must not be set up to go round and tax SMEs to kill the already collapsing industry. Government needs timelines for certain raw materials to be manufactured in Nigeria and backward integration must be encouraged.

Government still needs FDI for people to come here and do business, that may be why they are not strict in checking influx of foreigners into the country?

FDI has never helped us because  foreign investors are not building new factories to create jobs and transfer technology to the local people. Rather, they get cheap loans in dollars, from abroad, convert to Naira, come here to rent old factories and begin to import goods from their countries to kill our local industries. For instance, people dealing in vegetable oil in Nigeria must own a manufacturing plant here, rather than importing from Malaysia or Thailand. Government must revoke and review existing waivers and incentives to cut across all industries rather than a few.