By Amaka Agwuegbo
Despite the Central Bank of Nigeriaâ€™s recent pronouncement of a N500bn industry revival fund for operating industries seeking to refinance or restructure their operations, business owners still groan under the harsh and unconducive operating business environment.
According to the CBNâ€™s guidelines issued last week, â€œLoan amount is a maximum of N1bn for a single obligor in respect of refinancing/restructuring. The Fund shall be administered at an all-in interest rate charge of 7 per cent per annum payable on quarterly basis. Specifically, the managing agent – Bank of Industry, BOI – shall be entitled to a one per cent management fee and the banks, a 6 per cent spread.â€
On criteria for eligibility, the CBN said: â€œA borrower shall be any entity falling within the definition of an SME and/or manufacturer; an entity wholly-owned and managed Nigerian private limited company registered under the Companies and Allied Matters Act of 1990; a legal business operated as a sole proprietorship; be a member of the relevant Organised Private Sector associations such as MAN, NASME, NACCIMA, NASSI.â€
But according to operators in the Small and Medium Enterprises, the provision of the indusrial intervention fund is not the solution to the myriad of problems hindering the growth of their businesses and the expected revenue to be generated.
Vanguardâ€™s investigations reveal that problems ranging from bad roads to epileptic power supply and inability to assess funds are some of the challenges hindering the growth of the small and medium scale enterprises. According to the guidelines, N300bn would be applied to power projects and N200bn to the refinancing/restructuring of banksâ€™ existing loan portfolios to Nigerian SME/manufacturing sector.
â€œSuch manufacturers will include SMEs, defined as entities with asset base (excluding land) of between N5m and N500m and with labour force of between 11 and 300.â€
Though the guidelines noted that in its bid to unlock the credit market, the N500bn Debenture Stock to be issued by BOI was approved for investment by the CBN, but Aaron Anyanwu, the Technical Director, Whizzo Construction Ltd., is of the opinion that necessary amenities ought to be in place for the intervention fund to be effective.
â€œGovernment can make the operating environment more conducive for entrepreneurs to invest in by ensuring that the necessary amenities are available for business owners to operate at full capacity.
â€œThis is because the bad road conditions and epileptic power supply have made business owners appear incompetent as we lack the basic and necessary amenities to do our jobs, especially as we canâ€™t operate without regular power supply. Most times, we spend a better part of our profits on powering our machines to do the jobs.
â€œWe also have the challenge of insincerity and unfaithfulness because after taking someone through the training process, it is expected that the person would work for you. But what happens is that the person now sees himself better than his peers and even you and decides not to abide by the agreement earlier reached.Â He leaves to set up his own business or go work for another company that offers a higher pay package with the skills and knowledge gotten from you.
â€œWith the global financial crisis, banks no longer give loans. Even with a N50m collateral presented, you canâ€™t assess a N30m loan, so you end up using your personal money or borrowing from friends and family. The financial crisis has transcended to business owners who now find it difficult to their businesses due to lack of funds.â€
Aaron would appreciate if taxes charged can be reduced because itâ€™s horrifying that an entrepreneur with a N60m turnover and 20 per cent profit is compelled by law to pay 32 per cent of his profit as tax, which would leave him with little or nothing to live on.
For Lekan Onasanya, MD, Finicky World, the high cost of funds is making it almost impossible for SME operators to be in business.
â€œFood retail business ought to be a fantastic money spinner, but the high cost of funds has made it almost impossible for us to secure loans from banks. So, we are appealing to government to seek ways of reducing the interest rates charged by banks as small business owners are already disadvantaged.
â€œWork force is a huge problem for entrepreneurs as they lack the skills and basic education needed in the jobs. Some of the staffs we hire lack the basics of what they claim to have, therefore, the application of the basics is very faulty and we need that critical mass to get it right.
â€œMultiple taxations and over-regulation by government agencies in certain aspects that promote businesses and this is leading to the dearth of entrepreneurs.
Mr. Shola Osolana, the managing director of Image Drycleaners Limited, spends a good percentage of his profit powering his dry cleaning outfits due to lack of power supply. â€œDue to governmentâ€™s inability to provide steady power supply for us to run our businesses, Image Drycleaners consumes 80 liters of diesel daily to power our 400KVA generating set. Imagine using 1920 liters of diesel monthly, especially when we both know that such money could be used for other better things.
â€œThe workforce is another big challenge and as a result, we have a situation whereby the work culture has corroded. Therefore, some staff may decide not to come to work, yet, theyâ€™ll not call to inform anyone.â€ Mrs. Lola Olatomirin, managing director of Câ€™dumere World, an interior dÃ©cor and designs outfit, is of the opinion that government should appreciate the little efforts entrepreneurs are making in boosting economic productivity by facilitating easy access to loans.
â€œIf we want to meet demand, the funds to source for the needed raw materials are not available and since it is a small business, we canâ€™t really go to banks to seek for loans due to the smallness of the funds we seek.
â€œDespite the fact that we pay for overtime, still workers grudgingly put in extra hours at what puts food on their tables. Some may decide to come late without calling before hand to seek permission.â€
While tasking government to seek for ways of setting up or reviving textile companies so as to facilitate easy access to one of the basic materials, she pointed out that this has become necessary as some customers prefer foreign to locally made goods. â€œSetting up factories to produce the fabrics would not only mean access to materials, but would create employment and on the long run, reduce our operating cost.
If the CBN is set to achieve the objectives of the N500bn intervention funds, which is aimed at fast-tracking the development of the manufacturing sector of the economy by improving access to credit by manufacturers; generate employment opportunity and provide input for the industrial sector on a sustainable basis, SME operators task the CBN and government to ensure that other factors that would facilitate the growth of the sector to be put in place.