By Udeme Clement

The move by the Federal Government to review the economic policies of  the Jonathan administration to enhance job creation in the country has divided  stakeholders in the economy.  While some economists said the review is imperative for inclusive growth and development, others stressed that massive investments in small and medium enterprises (SMEs) as well as the real sector will pave the way for creation of jobs, not only for youths, but  also for the about 70 per cent of  the  population in poverty.

The Chairman, Toiletries and Cosmetics (T&C) Group of the Manufacturers Association of Nigeria (MAN), Mr. Ikpong Umoh, in this interview, advises  government to invest more in agriculture, manufacturing and SMEs to tackle unemployment crisis in the system. He stresses that the composition of the committee on policies review by the Federal Government should cut across all strata of the economy to ensure transparency and sustainable development. 

President Muhammadu Buhari  has just ordered a review of the economic policies of former President Goodluck Jonathan, to enhance job creation. What do you think will come out of this?

Frankly speaking, I think President Muhammadu Buhari  is on the right track and has good intentions.  It is important to review the economic policies of  the previous administration. Some policies that were good can be continued with, while others that may not fit into the present circumstances should be modified. Most importantly, the committee doing this review will have to be properly constituted to avoid the discussions and deliberations from being hijacked, such that the outcome becomes heavily coloured by perceptions anchored on personal, selfish and parochial interest of few individuals as well as entrepreneurs.

The composition of this committee should cut across all strata of the economy, not dominated only by the multinational- Organised Private Sector (OPS) – players, who are after personal interest and that of their members. The reason is that these multinationals see SMEs as competitors that must be killed for them to have complete market advantage.  With this mind set, they will not give government  information about the true picture of the level of decay in our industries.  If the President wants to succeed, my advice is for him to widen his scope of consultation and to focus more on revamping agriculture and SMEs to stimulate large scale economic activities. The review of previous economic policies must be done in a manner that will allow agricultural activities and SMEs to start-up in various places across Nigeria, to create jobs for the citizens.

Beyond the review of previous policies, government should investigate why sustainable economic progress has eluded this country since 1960 in spite of huge revenue and investments in agriculture and industrialisation. What is hindering the growth of the SMEs sub-sector could be traced to the multiple taxation system by all tiers of government and the practise of Internally Generated Revenue (IGR) by government Ministries, Departments and Agencies (MDAs). The MDAs in the quest to generate revenue have all metamorphosed into regulatory agencies drawing revenues from SMEs. Let us reverse the trend by tasking all these agencies on encouraging the growth of SMEs by giving back instead of milking them to death.

Government should embark on more developmental projects in the country to create jobs for the citizens. For many years, Nigeria has been operating an economy based on crude oil as a major source of revenue, so now is the time to invest more in the real sector in order to move away from over dependent on crude oil.  At present, oil revenue, from which the government relies to fund more than 60 per cent of its budget has lost more than half its value in the past 12 months. Meaning there is need to get other sources of revenue to keep the government running. Also, government must work towards blocking leakages in its income flow, recovery of looted funds and  tackling corruption in the system, especially in the civil service.  These should take centre stage of government’s attempt to revamp the economy holistically.

Also, government should do more in diversifying the economy. The more number of people are gainfully employed, the more the unemployment issue is tackled. Encouraging more investments in agriculture, manufacturing, especially the SMEs will definitely boost government’s revenue in the short and long term. This will also open new windows for job creation in the country.

Why do you say so?

This is because some of the agencies are inventing more regulatory requirements every day to make money from the SMEs. Some of these requirements carry heavy financial burden on SMEs, and many cosmetic SMEs are discouraged from the start. Take for instance NAFDAC’s requirement for a stand-alone building for anybody who wants to venture into cosmetics is out of tune with what obtains elsewhere.

In other advanced countries, the requirement for stand-alone building applies to Pharmaceutical and Foods industries but here it is extended to cosmetics, mainly for the purpose of increasing their revenue.  This is done in spite of the fact that cosmetic products are not ingested but applied on the skin and has little or no tendency to cause severe damage.  A typical small budget stand-alone building will cost nothing less than N15million. Aside from the big multinational companies, how many small scale cosmetic industries can afford such a huge sum? Can a cosmetic firm operating with a capital of N500,000 afford N15million for a stand-alone building?

Can you give us the statistical analysis on how you arrived at N15million?

It is very simple. To acquire a land in Lagos State, you need over N5million to N6million. You have to pay another N4 million to get the Certificate of Occupancy (C of O).  Without C of O, no bank will give you loan to finance your business. So, you have to spend more than N7million for construction and finishing, to bring the building up to the standard required by NAFDAC. In fact, at the end of it, you may need more than N15million just to get a stand-alone building. The capital for raw materials and equipment are not included in this N15million. Now let us be sincere, how many micro SMEs can afford this amount? Ironically, some of the cosmetic products we see on our shelves in Nigeria are made by micro industries in China, Taiwan and even Senegal. The Nigerian Micro SMEs are deliberately being prevented by regulation from being actively involved in making cosmetics. Have you seen how regulatory agencies whose mandate is to safeguard public health and nurture the growth of SMEs indirectly killing the industries?

Right now, there is another requirement by the Standards Organisation of Nigeria (SON), that prospective operators of SMEs who want to buy a new machine must pay between N300,000 and N600.000, for SONCAP Imports Permit to bring in equipment. That is outrageous for SMEs. The President should include these issues in the policies review in order to merge these agencies and reform them to get into creative and productive ventures, to generate money for their use instead of churning out toxic regulatory framework to kill SMEs.

You are a stakeholder in the SMEs sub-sector, also an employer of labour. With these challenges, what do you advise government to do?

Well, let government look at practical solutions for SMEs, especially industries operating at a micro level. For example, every raw material that is not produced locally within the country should be allowed to come in at 5 per cent import duty. Then anything that can be made locally should be restricted by any means to reduce its inflow. Government can control influx of finished goods that can by manufactured in the country by imposing high tariffs, let say 50 percent and above to discourage importation of such items. The recent directive by the Central Bank of Nigeria (CBN) to restrict the use of its forex window for importations of some items is a welcome development ,but this should be revised as some packaging materials for some industries, which cannot be sourced locally are embedded in that broad classifications.

Foreign Direct Investments (FDI) initiative should focus only on industries that will reduce dependence on some imported raw materials. For example foreign investors capable of manufacturing Proteins ,Talc, enzymes, synthesising and certain pharmaceutical active ingredients using locally available start-up materials should be encouraged to come in, not those coming to manufacture items that Nigerians are already producing.

The CBN has also given a new directive to stop foreign firms from printing cheques for Nigerian banks. What is your take on this?

To me, such directive should be given to our commercial banks and not the foreign firms. Aside from that, banks should be compelled to fund and support the growth of SMEs. They declare huge profits every year, yet they are reluctant to support SMEs. The sale of government bonds should be restricted, because banks prefer investing in bonds instead of SMEs.

On the whole, Buhari should bring out an Economic Blueprint tasking all government agencies to be productive and accountable. Let these agencies engage in productive ventures to generate revenue (this is the true IGR), instead of killing SMEs with multiple charges. For example, NAFDAC has a mandate to generate its own revenue by establishing high profile industries and managing them. Let NAFDAC set up a drug manufacturing industry in Nigeria. Aside from NAFDAC, we have SON, Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), Raw Materials Research and Development agency, among many others. All of them should engage in productive ventures to produce positive results that will help government in building the economy, instead of existing on revenues generated from industries.

Also, it is good that Buhari met with manufacturers within the Manufacturers Associations of Nigeria (MAN), which we are also members. This is a welcome development as he will get to know the problems of this formal sector and put in place incentives that will drive the sector in a sustainable manner. The President should continue to widen his scope of consultations with other stakeholders who may not be members of MAN.