Dr.Umaru Dikko Radda is the Director-General of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
In this interview with Peoples Daily Ese Ahwotu and Ochiaka Ugwu, the Katsina State born politician spoke on his plans to reposition SMEDAN, formalize about six million Micro, Small and Medium Enterprises (MSMEs) and other sundry issues that affect small businesses in the country.
Can you tell us what “OLOP” is all about?
Let me start by giving a brief history of OLOP. It was a programme that was gotten from Japan and it means “One Local Government, One Product”. The agency conceived an idea of the programme and the programme came on board in 2004. So, much work has been done on OLOP, but the OLOP programme has not been implemented. The idea behind OLOP is to identify one single product in each Local Government of the federation which has competitive and comparative advantage. So, that we can scale it up, improve on the production and then see how we can link it up with market. It has been with us for a very long time.
When I came on board, I looked at the programme and I saw a lot of things which are beneficial to Micro, Small and Medium Enterprises (MSMEs) and felt should be implemented. In 2016, we had a lean budget on OLOP programme and we borrowed money from another department which is cluster development. OLOP is also cluster development. We combined the two, so that we can develop pilot project. We were able to do that by identifying five centres located in five states. These are Kaduna for honey bee production and dry meat processing, Abuja for cassava processing, Anambra for palm kernel and Osun for sweet potato flower processing. What we intend to achieve with the project is one, to identify organic clusters who are into that activity for a very long time. After identifying them, we will find them a space to operate and we form them into cooperative if it does not exist.
Having done that, we will provide them with the necessary equipment and working capital to scale up their production. The working capital will help to buy raw material and produce more. The essence is to produce more quality product that will stand the test of time as well meet both local and international standard.
We will give them entrepreneurship training on how to manage the business well and effectively. We also link the money with the Micro Finance Banks in their various locations. It is going to be an interest free loan as SMEDAN will take up the administrative charges. We are going to give them 30 percent up of whatever investment we made in that sector. They are paying only 70 percent. The essence of this is about motivating them to do more by giving them a kind of incentive and take away the interest burden on them. It will also help them to learn how the banking process works. This means that most times they may not need SMEDAN to go to bank and ask for loan.
Again, it will increase productivity and market access which SMEDAN will help them locate. Above all, we will teach them some component of export processing for them to be in line with modern thinking of businesses. These will in great measure improve the economy of the country.
If we do one centre in a local government, which will allow other clusters within the local area to learn from it, they will end up developing like the main centre. In 2017 budget, we have a provision to go to 109 centers. It means one location in each senatorial district of the federation. We are also planning another provision in 2018 budget to go to the 360 federal constituencies in Nigeria. If you add up 109 senatorial districts, 360 federal constituencies and the five centres we already have, it means there are only few local governments to be covered. This now makes us to cover the remaining local governments in 2019. The target is to establish one in each of the local government of the federation for it to serve as a test ground for all the MSMEs to learn from.
How do you intend to achieve this with your lean budgetary allocation?
In fact, our advert is coming out for any financial institution to key in. our plan for 2018 is that SMEDAN will contribute 50 percent of the fund and we will get a marching fund from the micro finance bank. We will go further to take the interest component just to encourage them to support the programme. But what we are doing now is like SMEDAN contributing N1 million and the financial institution bringing N1 million for the working capital which will be given to the beneficiaries. We are doing this to meet up with the yearning of the people.
You have been hammering on two issues since you resumed, one is Conditional Grand Scheme and amendment of the act establishing this agency. Can you tell us the statues so far?
Yes, when I came in as the new DG, I looked at the statistics, because it is the first port of call. As at 2017, we have about 37 million MSMEs and out of these 37 million, 99 percent of them are informal. They are micro businesses and most of them are located in rural area. Most of the operators are illiterate. They didn’t go to the formal school. Given the fact that the major mandate of the agency is to grow and develop MSMEs, we must make them formal to grow them. If you look at other countries of the world, you will realize that is only the formal businesses that most time grow. From small to medium and large scale, so you can’t grow them without making them formal.
So, what we intend to achieve with CGS is to know how we can formalize this very large informal sector. Based on the fact that the people you are trying to formalize are mostly illiterate and residual in rural areas, you must motivate them to achieve your aim. That was the reason we brought CGS to tackle the formalization. We give grant but with some conditions and these conditions are: you must register your business with CAC and SMEDAN is going to shoulder it. You must open bank account, we have spoken to some banks and they are willing to come to their doorstep to open account for them. We have spoken to most major insurance companies to provide micro insurance into the scheme. SMEDAN will give entrepreneurship trainings to beneficiaries. After the training, we will expect you to employ more than one person in your business.
Although, we can’t cover everywhere now, but let us just start with some figure that will help MSMEs in the nation. We will expend with time and we intend to formalize about 6 million micro businesses in Nigeria within a span of four years. When you do this, others will need the grant to formalize theirs for they will certainly see the benefit of formalization. For equitable distribution of resources, we are not looking at the Local Governments, we are thinking of taking it down to the wards. Local governments have 10 wards or more, so we are looking at 50 each ward making it 500 per local government. This will ensure that no one part is dominated. The aim is to make people know what they supposed to do and do the right thing to hold on to their businesses. When the National Assembly came for oversight function, we told them about the scheme and they liked it. N2.5 billion was allocated for it in 2017 budget for pilot study. This was to be done in each of the six geo-political zones namely Katsina, Gombe, Benue, Oyo, Ebonyi and Akwa-Ibom. These states will benefit from the pilot project as soon as the money is released. The intention is to cover 100 enterprises in each of the local government in the six selected states.
On the amendment of the act establishing the agency, when I came in, I saw there are so many things that need to be put in there to strengthen the activities of the agency. We intend to make the agency capable of regulating the activities of MSMEs in the country being the apex organization in charge of MSMEs subsector in the country.
Again, is the issue of funding, in the last few years the country has witnessed economic recession. The amount of money allocated for our agency is very small compared to other agencies similar to us. It is not commiserate with the huge responsibility is saddled with in terms of promoting MSMEs which is the backbone of any economy. We now ask, how do we generate funds to complement our budget? We are looking at the luxury goods being imported into the country, maybe take some percentage. We are also looking at profit after tax of large companies in the country. It is the practice world over that the large companies have to develop the smaller ones. That is why we decided to take a chunk of that and other sources that I cannot tell you now. But the essence is to generate funds outside the budget to enable us implement our numerous programmes targeted at growing the economy. It will also help to regulate more and be informed on what is happening in MSMEs space. If we can’t get our act right, most of the challenges of MSMEs in the country will be over.
As of today, it has passed first and second reading, we have done public hearing. It is my belief that it will pass third reading and subsequently signed into law for the good of Nigerians.