This microfinance article is an excerpt from my upcomi
ng book , AFROCENTRISM WORLD DEVELOPMENT IDEOLOGY AND AGE OF MICROFINANCE
ng book , AFROCENTRISM WORLD DEVELOPMENT IDEOLOGY AND AGE OF MICROFINANCE
DEVELOPMENT TRANSITION AND
ROADMAP
The principal problem associated with development is the
issue of capacity .By building adequate
capacity development can not only be
created but also sustained in the long run .Investing in capacity building is
equivalent to nation building in the long run which depends on the enterprise
of capacity to sustain polity and then nationhood by creating national wealth
that outlived its times as the legacy of posterity .A thorough adoption of this simple formula
is a tested roadmap and a reliable
transition towards the end of poverty in the society of man .Developing
adequate capacity or sustainable
capacity building is a foremost criteria to capital development .
As we earlier emphasized in the second chapter development is
about people and development means
people . Jeffrey Sachs in his famous book The End Of Poverty ……..how to make it
happen in our time observed that poor countries lack six major kinds of capital
:
1.Human capital :this includes health skills and competence needed to make each citizen or influence economically productive
.person ;
2. Business capital : facilities machinery and transport
infrastructure needed in agriculture services and industry ;
3. Infrastructure :
Roads , rail water power , telecom . ,
airports and seaports which are elementary outputs of basic development to
promote mass development and business
productivity ;
4 . knowledge capital
:scientific and technological knowledge which can grow mass productivity is
highly underdeveloped .This should be
nurtured for the promotion of production physical and natural capital ;
5. Public
institutional capital : Bureaucratic bottleneck and distortion is a major bane . Commercial law ,
judicial systems , public sector services
and effective control that could ensure peaceful and progressive division of labour must be put in place to promote mass development ;
6 . Natural capital :
arable land fertile ecosystems , rich soils and biodiversity. This provides
ecological services needed by humanity for earthly sustainable living .
As we noted investment in people can take care of this
responsibility and effectively manages these enormous assets for national
development .That is the only challenge facing
the under developing nations .The
burden that this region has come to face is how to create wealth .In the World
Bank report [‘where is the wealth of nations ? measuring capital for the 21st
century ’] , it showed that intangible
capital is near to zero in the major oil countries like Nigeria ,Algeria and
Venezuela and often negative . The
classic ‘resource curse ’as noted by
Auty and Gylfason [2001] was also
documented .
When Richard M. Auty first used the term resource curse in
1993 he used it to describe the recklessness of
oil rich territories and their failure to use their resources to benefit
their economies and boost wealth generation and counter-intuitively had lower
growth rate than countries without abundance of natural assets or natural
resources .Studies by Jeffrey Sachs Mark
Warner among numerous literature have shown link between natural resource
abundance and poor economic growth .
Empirical evidences abound . In the Opec territory between 1965—98 per capital in this
region decreased on average by 1.3 % whereas in the developing world grew by
2.2 percent on the average [Akinjide:2006]
.
The World bank further
find out that What is the most important
component of wealth creation across nations ? It also interrogates whether
natural wealth increased or decreased as countries develop . O f course it does
decrease as long as flaccidity matures or develops .Then it noted the top 10
wealthiest states such as Switzerland , Denmark –the food basket of Europe ,
Sweden , oil rich Norway , Luxembourg –Belgium , Austria ,France , United
States and Germany .Except for Norway
none of this depended on natural capital or resource for national development
since they utilized effectively the Sach’s golden formula [SGF/SAGOF] which has
taken them half a millennium to nurture . Even for Norway where natural resources
including oil and gas from the North Sea constitute negligible 12 % of total wealth ,
her mainstay is SAGOF .
Whereas the bottom countries
such as Chad Madagascar , Guinea –Bissau , Nepal, Niger , Congo ,
Burundi , ,Mozambique Ethiopia and Nigeria which scored second to the last with
Congo the percentage was noted to be horrible
. For instance in a
monocultural nation like Nigeria crude oil accounts for over 70% of
its earnings and 95 % of export
receipts in a country in which 98
percent are poor
Likewise in his book The Origin Of Wealth Eric Beinhocker also admitted what is generally accepted by
all economists that wealth is the
product of human efforts and labour
using the sweat from our brows and the knowledge in our brains for cultivation
and accumulation .In other words it is not investment in natural resources land
geography and building that is vital for
national development per say but in
people .This investment in strategy and technology that boost growth which can only be successful for the
umpteempth time by starting from the grassroot empowering our people and
opening up our communities for mass development . And that of all markets in the country human resource or
labour market is the most maligned and abused market .
DEVELOPMENT AND NOT
DEMOCRACY
We have repeated this several times that it is somehow
baffling that virtually everything that comes out from developed world are
consumed and imbibed hook line and
sinker without remorse and without
reflection or shame by the
developing world including its form of
government we have adopted today which as claimed is symptomatic of development
.Whereas democracy as they claimed being the best form of government is easily
contended on the ground that it is not a
foolproof or an arbiter that represent mass development in the longer term. These are the
two poles entirely clashing each other
.Normally democracy is meant to promote development if not it should be
abrogated for a better alternative . How can we make democracy work ? Does it
seem an alternative not workable or exist ? Let us first look briefly at the
politics and antecedence of democracy in the developing
world .
The Greek writer Aristotle in the 4th century B.C. , noticed these
types of government :-- where power is held by one man is called monarchy ;
where power is held by a few is called Aristocracy ;where power is held by the
mass of the people ,this is democracy
.These forms according to Martha Stewart in The British Approach To Politics
are described as mere appearances rather
realities and these types in order of sequence could be fronted for by the
following : tyranny ,oligarchy and ochlocracy . Infact oligarchy or ochlocracy
brazenly fronts for democracy in virtually in every
developing society while the capital
‘word’ lives in limbo . Every form of government can be good and can be bad it all depends on the human system which
will drive the governance system and
chains . When the power belongs to the mass of the people they called it
democracy but oligarchy in the same polity has conned the good aims of
democracy if any and hence retards development that democracy is supposed to
promote. Hence democracy in the 3rd world must scraped or revamped
for it to be effective . If not a good alternative should be found . .
A media writer once argued the latter position that democracy retards development
.I think the truth is the most profound around .Definitely it is
. He argued the thesis that the developing
region needed development rather than democracy was a brainchild of
the post war period waxed strong in the
70s when the cold was at its peak .Samuel Huntington and a group of American political scientists
argued volumes that democracy or undesirability of democracy for a country that
have not reached a particular level
of economic development .On the other
hand they also argued what developing countries needed was good governance
backing it up with appropriate data and historical instances . Writing in democracy
and development Sola Fasure at defunct Comet [now The Nation ] commented ‘ when the cold war ended the
argument changed ’and the consensus was that democracy is good for every body
.. But he bungled a good argument that ‘the lies and propaganda of the past
will simply not go away ’ .Were they truly lies or propaganda because democracy
did fail to promote absolute development .
We assess democracy by
global appeal spread and impact . The growth of democratic
institutions that started in mid-70s spreading wildly over the next
two decades into Latin America
former Soviet region and the SSA region in its third wave as coined by
Huntington suddenly grounded to a halt .According to freedom house a democracy
watchdog there were 118 electoral democracies in 1996 around the world .Almost
a decade later they were 117 in relative
proportions rated free partly free or not free were static since the 90s
Usually in the 3rd world the impact vs.
development is close to zero because structure to make democracy effective if at all indeed vital to development
is grossly missing .The democratic interest had persisted but development in
this region had stalled and the grand
hopes have not been realized .Several
years ago the former soviet had gone from frontier land of democracy to waste
land within a decade The south American
experiencing crisis of democracy from weak state institutions to corrupted
political elites .Some reports argued 15
-20 years after the gains of political freedom personal security economic well
fare were not better than in the previous period .
Africa is still the basket case of democracy unworkability in which
authoritarian democracies have failed . This is working perfectly in the former
soviet block-mainly Russia and especially East Asia and including China North Korea , Vietnam , Laos and Singapore . These are some of the
world fastest growing economies . Majority of African countries have slumped
further into poverty and gross underdevelopment in which every form of
government has failed . The human system or institution is the major problem.
There is no doubt that
western Democracy foisted on the developing region has grossly
under-performed and heavily retarded development as they failed to invest in
their people ballooning mass poverty .We need not be deceived . This is simple .In 1992 before an audience
in Philippines .Singapore ’ s Lee kuan
Yew remarked ‘I do not believe that western democracy leads to development . I believe that what
a country needs to develop is discipline
more than democracy ’ .And good governance is a function of the relative
stability of political discipline that is mature enough to curb the excesses of
democracy that disrupts the flow of development to the people .He observed ‘the exuberance of democracy leads to
indiscipline and disorderly conduct
which are inimical to development ’.
It is no longer news that this belief transformed Singapore
preaching new ideology and consolidating
this fact that each nation must
determine the nature of development model and pattern that suits its economic
climate and demographic institutions .The belief in the superiority of
governance in the case of India –the world largest democracy and the Asian
tigers .The three authoritarian democratic states between 1960---1987 , grew at
astonishing rate of 6.4 % per capital whereas the liberal democracy in spite of
its highly educated and committed
leadership still recorded a paltry 1.9
percent per capital and western style democracy has dampened the possibility
of radical changes in favor of the
poor .
Radical changes made in favour of the poor and efforts at
land reforms were stressful and frustrated by powerful landed elites in brazil and Venezuela prior
to the election of left wing government in this region to effect reform in the
new century. Development is a turbulent process which involves distribution of
resources mobilizing every available
resource to dominate forces of nature and ensure that every stakeholder in the
society is affected .It should be noted that institutions that have supported and
sustained western democracies were evolved
over the last 400 years .The
British parliamentary institutions
the oldest was developed over the course of a millennium .
Political scientists and media scholars have contended this
could be strenuous for late comers to
development which need to adopt home grown institutions to quicken their pace
of rapid development or else may not
catch up with the rest of the world .
THE
DECADENCE OF DEMOCRATIC INSTITUTIONS
The decadence of
democratic institutions permeates every part of the developing countries .We
shall use the basket case of Nigeria as
the case study at this point .The deputy editor at Business Day Charles
Ike-Okoh and the fellow Journalist Badejo Ademuyiwa in the research report entitled ‘ National Assembly : World ’ s Biggest Democracy Cost Centre [ 2] ’[10
Tuesday 10 February 2009 ] .In the intro , they affirmed ‘ Since June 2007 the
house of representatives has not passed
10 bills because most of their time is spent sharing money .’ According to a
former legislator ‘‘It is hard to
determine what the lawmakers take home monthly .Nobody knows it except an insider . It has been done in a
way that nobody can discover it. Only the banks can tell the
exact amount a federal legislator collects monthly ’’.He called for removal of
secrecy through the order of the CBN and
the backing of government . This he believed would not be possible and can even
be politicized by CBN .
The report shows that the national Assembly
member ’s monthly salaries in the
early part of Yaradua vs. Good luck regime earned 4.5million exactly the size
of a local government allocation from
federation accounts in 1999 while the speaker
collects 33 million naira . From January
2008 onward each collects 10.7 million naira and Speaker collects
between 75 million to 100million naira .
The senator earned 44million naira
monthly and 528million naira annually and 128 million naira annually for
the reps .. What only needs to know much president and ministers are earning to
understand the gravity .Even then let us make comparison to 1983 .President
musa Shagari was earning 25 thousand naira per annum and Lagos state governor
like other 18 governors were earning 20,000 naira compared to today . Every budget year they bring up several
projects and then huge money allocated to recurrent expenditure is eventually
shared among themselves after passage of fraudulent bills plus huge constituency funds, Which do not also reach
the grass root .
To worsen the case nobody audits their accounts because the auditor general of the federation which ordinarily audits the
National Assembly and public account committees with supervisory powers in both
houses are easily being bought over .National Accounting Standard
Board [NASB]is also being compromised
and sanctioning for erring auditors and
professional accountants are
common .Selfless service is very hard to come by and corruption to borrow
Stewart ’s ‘has turned a bad
habit into a mortal disease’ .Every institution is consumed by this intrigue
and moral decadence .Consequently less than a quarter of 1% of
national population controls more than two-thirds or 80-90 % of national budget
and more than 1 percent controls 80 percent nation’s wealth
in a country in which more than 3 million join labour market every year
.And one can imagine the kind of impact that
a house that is often divided itself will have and where fight ,
exchanging of blows and rancor had persisted among members like primary school
pupils will have .
These people are just sharing money living no legacy for posterity and the dignity of their
children .At a town hall meeting organized by Nigerian Reunion Cooperation in
Las Vegas the speaker of the house of Representatives Dimeji Bankole alleged that
about of 65percent of federal government
allocated funds unaccounted .He noted that the inquiry by house of representatives discovered
30 percent of federal budget allocated to construction of roads across the country was
channeled to projects already paid for and executed .Within a band of five
years[2004-09] a local newspapers Business Hallmark found out that about 31 .4trillion naira was shared in the
country .A whooping $217 billion in a country that is confronted with limitless
challenges and growing deindustrialization .Government indeed is too costly and mismanagement and corruption
is a central bane . Take a look at the
grim statistics :
-----In a review of 2008 human development report by United
Nation development programme a very
depressing nature of Nigeria
was painted . The country has a long way
to go as noted in the fact and figures [ human development index ] presented in the authoritative report
entitled :fighting climate change :
human solidarity in a divided world ’.Even among nations grouped under low human development so many nations fared
better than Nigeria mainly Eritrea and Senegal .In a group of 177 nations we
stood at 158 .Many more grim data abound from other sources :
---- under five mortality rate is close to 200percent per
1,000 live births and maternal mortality rate is 800 per 100,000 live births
.Whereas Ghana is one of the leaders in
this category on the continent along with South Africa and Kenya .Her under
five mortality is between 110 –120 per a thousand live deaths while other
sources put Nigeria figure to be as much as
200 deaths .
----Only 30 percent of Nigerian population have access to
electricity and less than 20 percent of rural areas have some form of
electricity .Per capital consumption is about 100 kwh
-----Only 25percent have access to decent housing living in
befitting places not slum motor parks or
on the streets and housing deficit of 16 million is expected to cost 42
trillion naira
.----40 percent of Nigerians are illiterate and more than 50
percent are unemployed .
-------70 percent of the industries have collapsed and
virtually every sector of the economy has collapsed due to decline in poor capacity building
.This speaks volume indeed :
[ 1.] manufacturing
sector contribution to the GDP IS ROUGHLY FOUR OR FIVE PERCENT and has the
capacity to employ a large number of people like heavily neglected
agriculture but its return is low .
[ 2.] The
hydrocarbon industry constitutes 95% of foreign exchange earnings 85 percent of
federal revenues and 65 percent of budgetary revenues and contributes 40
percent to the GDP but hardly employ half a million workforce .And every year
60 percent of annual earnings from oil are siphoned back to western countries
,the capital flight is 95 percent of every dollar spent in the industry economy creating jobs for foreigners at the expense
of her people .
[ 3.] About 1.5million tons of oil has been spilled since commercial
production of oil started in the country on the average of more than 300 spills
annually .The condition of life in the world leading wetland a 70,000sq.km region with the
world largest number of rivers and waterways is the same in its more than 1,000
communities where spillages have pillaged farmland watercourses shortening life
expectancy making condition of life unbearable for its people .
In its 2009 report Petroleum pollution and poverty amnesty international observed that
independent environmental and oil experts estimated between nine and thirteen
million barrels had leaked since the nation’s independence .It also admitted
during this period or over the last half century the Niger delta people have
experienced oil spills at par with Exxon Valdez tanker disaster every year
.Between 1976 –2001 close to 7,000 or 6,800 spills occurred .[UN.figures ]
.60percent of 31million people in this region depended on environments [United Nations Development Program ].
British petroleum was slammed with 10billion dollars lawsuit for leaking toxic
chemicals from its Texas city
refinery but what would be price of similar scenario for the Niger
delta and various occurrences over the last 50 years ? Why the fine or heavy slam ? Simply because
they can’t farm .According Iyayi[2008] in the study by European Union found out
that the microcredit scheme for farmers
they were involved with in the Niger delta had collapsed . Besides
being small say 20,000-30,000 naira per farmer didn’t produce any result or
seeds failed to germinate because soils
have been heavily polluted .
[ 4.] Where oil was discovered at Oloibiri now
regarded as fossil town instead of being a national monument now a national
embarrassment where close to 70 percent of youths do not have jobs .Since
production began more than 600billion dollars has been earned from commercial
crude receipt yet 70 percent of the
wealth were stashed out in foreign land.
[ 5.] 90percent of oil and gas industry
equipments were owned by foreigners and 90 percent of the industry is controlled by foreigners . If
90 percent of the nation’s economy is controlled by foreigners as it is
presently is it not shameful for the
so called giant of Africa ? Nigeria is the
only country in the world in that produces oil and yet has no tanker fleet .Foreign operators
dominate everything apart from tax and royalty moneys we have no stake in this
business from production to selling and the Cabot age scheme to fill the missing link was later heavily
sabotaged crashed like defunct national ship building and acquisition fund
and made irrelevant to the needs of local shipping tycoons and industry
operators .We should not fail to
remember that after over 50 years in the business indigenous oil producers
still do not control up 3percent of the industry production outputs .The 24
marginal fields with minuscular potential that could dry up in few years time
or within 5 to 7 years of production have a mere capacity of 5.7 million proven
reserves ;not very profitable in real
terms considering the cost of production
were leased to local operators while foreigners controlled the richest
offshore fields
[ 6.] The world
largest contribution to global greenhouse gases is the Niger delta which is the world largest
single industrial complex flaring more gas than the whole of other sources existing in
the SSA region put together which has the capacity to supply gas to the whole
of Africa not just West AFRICA .
7.] 90 percent of
the nation’s consumable goods are imported and capital flight crisis and
capacity building problems have never been abated . These are the reason behind
high unemployment and growing rate and
escalating dimension of deindustrialization .What the nation needs is capital
flight bill not local content bill really which encapsulates every problem
linked with capital volatility and Braindrain
----Also two thirds of working adult were unemployed or
underemployed and not more than one
third of Nigerians that should be in school were receiving any education .The
national bureau of statistics also complemented this sources that more than 80
percent of Nigerian youths are jobless where only 10 percent of graduates are
employed.
----- While Tanzania-the fourth poorest country on earth
alongside South Africa and Malawi have attained 90 percent success as far as
universal primary education is concerned the definite blueprint to develop an
average child stop street hawking and child abuse is still common let alone a concerted to get all children
into school .Rwanda tormented by genocidal fraction represents a great
motivation for poorly performing nations like ours especially in the promotion
of gender inequality and empowerment .The gender parity there is 98percent and
a force to be reckoned with in the same league like Malawi Lesotho and Uganda .
It is also leading in women political empowerment in which 49 percent of
parliamentary seat are occupied by its women [source :Dfd] . These are nations
that looked up to Nigeria
as big brother Africa .
------ General education level especially the tertiary
education is perennially declining and the certificate of average Nigerian
graduates does not more than the paper on which it is printed .The period
between 1960—1990 was not only the golden age of the university education but
was also widely in the international community . According to national universities
commission and the national academic staff union of Nigeria that in terms of
quality and research out local varsities were the best in the whole of
Sub-Saharan Africa [ Karani : 1997 Okebukola :2002 and Ibeneche : 2009 ]. This
was confirmed by association of Indian universities when comparison was made
between Nigeria
and India
during the 1981 period .That beside Nigeria no other country
experienced such a phenomenal surge of 13-14 percent growth per year .
Today the golden age was lost due to declining capacity
caused by poor vision and lack of clear cut strategy at sustaining earlier
capacity generated .IT was confirmed that no Nigerian university is listed
among the top 1000 in the world .In the 2007 ranking by THES --QS World university rankings only the
university of cape town is glaringly rated or found .Even in African ranking apart from South Africa
they trailed lesser endowed territories like Ghana and Kenya having only four
universities in the top 100 [OAU:44TH ; UNI.of Ibadan : 66th
; UNIBEN : 79th ; and UNI.of LAGOS :90TH .] .
Educational quality is so retarded that 80 percent of Nigerian graduates are
unemployable and more than 50 percent of Nigerian universities are glorified
public schools .Cultism and prostitution
rackets are prominent in one way or the other .The students in the universities took to examination malpratices simply
because fear of adequacy capacity for
success .They do not have facilities
for research and no money for foreign travel .The certificate are so worthless to say the fact even doctorate degrees are presently
suffering the same fate and many hardly can defend their certificates . The
university dons are aging .Gone are the days of Soyinka ’ s Osuntokun , Dike etc
which requires a new generation to fill but young people are not joining ASSU .
What will become the fate of these
varsities when these dons are no more ?Now let’s go textile industry
.Virtually almost every textile company in Nigeria had
closed shop. MAN put it succinctly that between1995 to 2005 the industry shrank
by 64percent and is endangered by illegal smuggling of textile materials
through the nation’s porous borders making the nation a dumping ground for
textile materials from India China Malaysia and Hong Kong .About 4.6 trillion worth
of illegal materials enter the nation ‘s borders in this way .She imports more
than 80 percent of her textile needs .Here is an industry which was formerly
the largest in Africa and the highest employer of labour in Nigeria after
Government which has the capacity to employ more than 300 ,000 workers with
multiplier running into millions of jobs indirectly .
Trade policies are
resistant to local climate .Nobody is against liberalization but total
liberalization without protecting anything unlike India and China is what we
are guiding against .Even advanced countries they do not liberalise every
thing .The experience in their steel
industry at the beginning of this decade in America and Europe leading to
integration is a warning to unrepented advocate of free trade . There is no way local producer can compete
against foreign manufacturers . The issue here is the quality of cotton and the
cost of production that availed against local companies .These people have been
developing the cotton and more conscious about its quality .
According to a local expert the Nigerian cotton so far gives
one perhaps about 6 meters of fabrics
per kilograms .One gets to the middle on
knitting when the yarn is spanned one
gets 6 meters but in the case of foreign
textile producers in most cases
that dump their fabrics in Nigeria the cotton they buy or produce in their
territory is of high quality and very
highly elastic and one gets about 18-20 meters
per same kilo. This made Nigerian
cotton and textile automatically uncompetitive
and which means local farmers are also left behind because they are the primary producers for
the industry .
It was found out that government deliberately decided not to
fund this industry especially the agricultural sector which could produce quality cotton by
refusing to fund research for future development of quality outputs .WHEN
PETROLEUM TRUST FUND [PTF] started funding research in this direction prior
to 1993 and was giving Nigerian farmers cottonseeds; they were adjudged and assumed
to the best the nation ever had .It was
yielding result as it produced over two times the local seeds per same hectare
.This intention was discarded by successive because it was not interest of
world bank and IMF presuming that PTF seeds as opposed to normal local
seeds could be their great undoing and
make us self sufficient and so productive . With the coming of the civilian
they succeeded in scrapping PTF using the government of the day citing
mismanagent and corruption .Since then no institution has a good intention for
agriculture prior to the 200 billion naira recently set aside by Yaradua vs.
Good luck regime .but dumping persisted unabated and the efforts of antidumping
committee set up several years ago couldn’t do anything about it .
The solution is improving capacity growing more cotton and
getting out quality and high yield per
hectare will make cotton easily more
available and prices affordable to enable manufacturers produce quality
materials enough for the markets .The textile industry we noted is extremely
important due its ability to employ greater number of people .Different
technologies are disposed in the market that covers 10 different types of
textile industries .Unfortunately government perhaps recognizes only one
. For instance the production of blankets sing lets and underwear is not the
same with carpets .The entire industry is not limited to production of wrapper
as many speculated .If the threat to jobs security and the growing rate of
unemployment is to be resolved the plight of the textile mills must be given
top priority
-----Why do we have these problems ? Beside corruption ,
mismanagement and growing deindustrialization ,we have noted that the major
factor behind perpetual economic decline
is poor capacity and the issue of capacity which we noted is the author of
development .A society that suffers moral decline is suffering from this malaise. The paralysis
is common in every sector to reverse decline a nation must build sustainable
capacity .A shortfall in national capacity encourages underdevelopment and
corruption . The question is :how many skilled labour do we have in this
country ? How many scientists doctors
lawyers accountants and vital industry vi-s-vis the demand of the economy and
the conducive nature of the environment required professionals welfare ? That
is the great challenge Let us observed
some sectors of the economy …For instance in the aviation sector ,out of
thousands of pilots on its [NCAA] register ,Nigeria according to Harold
Demuren can boasts of only 800 active pilots some of whom are
aged between 50 –55 years of age and then 60—65 years at this age you can ’t
fly again …Imagine 800 active
pilots for a country as big as Nigeria ! ……So many inadequacies abound in
virtually every sector of the economy .IF this could happen to Nigeria how
much worse in many African countries .
Almost every airline had collapsed like shangshangi, Bell view ,slok air
,sosoliso, Eagle air , Albarka etc .Those that are surviving are heavily
indebted like Arik air and even Air Nigeria until recently .Infact the environment is not conducive. Gone
are the days when Nigerian airways was the best in Africa with passengers as
high as 600 000 passengers annually
--the biggest in Africa .Now it is dead with
all 36 planes forgotten to the relics of history as we repeat the same old story over and over
again and the industry cannot
compete even in its local market
talk less of international market .
In the maritime industry , Nigeria has 100 mariners for 140 million people .That is an international
embarrassment. And close to half of these are active mariners and it took 20
years to produce each mariner .Moreover , do we have a
national shipping vessel? of course , this is popular and it is known
that the death of NNSL was a long story formerly with 26 shipping vessels left behind by the
military government in 1978 and now the
rest is history having been sold as a scrap and not even a single vessel is
left functioning .The fishing trawlers in the country were 260 but now about150 trawlers remain and this business is
controlled by foreigners . Piracy has caused a lot of hardship too. Our territorial waters is 90 percent
controlled by foreigners and unattractive ports costs the nation 20billion
dollars annually. Some sources put the losses
at 25.5billion dollars and that Lagos
state alone has 33 unregistered jetties that harbour illegal bunkering activities
.Another media sources also estimated that about 56billion dollars is
being lost annually from bunkering alone. That 70 percent of 200,000 tanker
vessels that pass through the
territorial waters annually due to unattractive ports do not berth for
bunkering in the country and prefer going to neighboring ports .This is a huge
amount of money more than the size of nation’s GDP in 2001
In the insurance industry insurable interest being lost
annually to foreign land is about 105 billion approximately 11trillion naira
due to poor local insurance capacity in addition to poor skilled labour .We
lamented also the situation in the domestic construction industry in which
foreign contractors had cornered the best and the richest contract in the
industry is also appalling …Besides
inhibitive factors in the industry
inadequate finance , high cost of fund , inadequate and poor quality building materials , availability of lands
caused by restrictive nature of Land use act decree ,poor skilled labour
and poorly performing institutions
……….contd.
By all ramification policies and institutions that are
supposed to promote development are inimical to growth and development .Policy
summersault and succession crises are prominent in place of sustainable capacity building ,encouraging development
arbitraging and development
holocaust in the long run in addition to
poor effect of reforms and reforms workability .Since independence no policy and reforms by strategic impact
have been sustainable and development
holocaust happens or occurs every decade in the country since 1950s .Take a look at the banking industry for
instance every decade since 1950 financial institutions especially banks
crashes have become a household fatality .
During the period , two thirds of banks operating in the
economy crashed—an unusual or inordinate phenomenon which has persisted till the last decade
of recapitalization when 13 thirteen banks finally closed shop to wind up
reforms , following Savannah bank crash in 2002 .The era of commercial banks and
merchant banks had gone riddled by bitter
politics in the marketplace and
then came the era of universal
banking in 2001 which removed dichotomy
between the two types of banking and many merchant banks previously been persecuted or marginalized from juicy
commercial banks market or probably owing to lack of access to the clearing house were
allowed to be converted into commercial banks .
The era of settlement banking also took over prior to the era
of consolidation or recapitalization in
2004 which scrapped the era of universal banks .It is unfortunate now that
there is a planned policy summersault again
returning back to the first of era of commercial banks and merchant
banks bitter rivalry probably after the
sacking of banks managing directors to the detriment of one of them who was
formerly a merchant banker while other 11 executives were left untouched .Universal
banking had also been sacked recently .
Policies and institutions were made to blackmail , witch hunt and capitalize
underdevelopment not just in the banking industry even with the rise of democracy in the entire sectors of the economy ,
policies were not sustainable and those vague were used to benefit the very few or buttress
the pie of vested interest .Moreover
there are no blueprints supporting the disbursement of 500billion naira set aside for power and SMEs credit guarantee
scheme according to Renaisance
professionals .Is Nigeria a nation or a contraption ? There is no direction at
all even with make believe improvement in governance since renaissance of
democracy .
Democratic structure is costly where recurrent expenditure
consumed 80 –90 Per cent of the budget and nothing is left remaining for
capital expenditure truly shows that the future of the country is mortgaged
and no planning for coming generation
.Infact the budget is not more than the paper upon which it is printed and
hardly gets implemented by more than 50 percent .Where are we heading to in
this country ?..With the assumption of democracy the glooming picture has degenerated from bad to worse .We
use Nigeria as a case study at this point
.....
The question is : Is democracy promotive of development ,
decadence or corruption ?Are we at this stage fit for adoption ? The military
had not helped either even though the best development and the worst corruption
era were perpetrated through them .The nation’s hands are tied . .What can we do ? It is the same story across AFRICA in which 150billon dollars is siphoned
annually by corruption and corruptocrats .This is unfortunate according
to Revive Africa -a book written by Gbolahan Laniyan in a region that accounts for more than 10
percent of world hydrocarbon reserves :controls 54 percent of world gold
reserves , 99 o f chrome reserves ;85
percent of world platinum ’. Infact it contains 40 percent of world total
strategic minerals and Congo basin alone controls roughly half of that .Bitumen
deposit in Nigeria is the world largest and Nigeria gas commands the best
authority and the biggest deposit among world leading gas nations like Russia
AND Iran .Natural resource had been a curse as noted rather than a
blessing .Whereas development had been
remarkable spreading from Asian tigers ,southeast Asia to some Arab territories
It is a bitter truth to swallow that we do not need western
style democracy that Lee Kuan Yew
believed is an abettor of indiscipline and corruption. But Nigerian had failed woefully
to learn from him despite being fond of him .For instance , in one of its articles Eddie
Iroh –a prominent media luminary lamented
19 0f the nation’s 36 governors had visited Singapore and read his book and
still yet the quagmire never receded .
The solution proffered
in this book also take care of new form
of government that is responsive to developing territories like Nigeria .Above
all it preaches capital development and egalitarian investment in people .and
first and foremost its peculiar financial system model must first evolve prior
to its adoption using DUCAPOT rule to touch the grass root
.Therefore the importance of microenterpreneurs and SMEs cannot be
underestimated which is the arrow of development in every of clime .
DEVELOPMENT INITIATIVE AND INDUSTRIAL REVOLUTION
Professor Alexander Geshenkron in
a comparative study conducted
‘Economic Backwardness In Historical Perspective ; A Book Of
Essays [1962] England
‘ . He noted the success of industrial revolution in England rested largely on the success of SMEs which
requires little capital to operate in
addition to founder’s specialized entrepreneurship . As an
economy categorized as moderately developing , Germany also
flourished during the period through them and
depended heavily on the Banking sector for their success .
Likewise , the quantum leap by Japanese economy during the similar
period , presented a more remarkable
picture of the power of these wealth machines to support her phenomenal
development prior to World war 11
.The secret behind this economic miracle
according to Professor
Yamamuva was simply cultivated
by phenomenal growth in commercial lending to micro enterprises .This
was made possible through the great
Zaibatsu – an equivalent of modern
development banking model . Today the world sole super power the United States
followed similar universal pattern of mass development .For instance Banks in Louisiana were noted to
have relied heavily on SMEs as engine of growth and so heavily financed them
for purposes of economic welfare of the
Nation ’s citizens . It is the same logic everywhere .The developing countries also after independence had pursued and implemented similar policies to no avail owing to socio psychological self
imposed barriers and the unceremonious truncation that came later through
external aggression .We should not fail to remember that China and India are
both 2nd and 5th largest economies on earth .Their
strength rest largely on SMEs in addition to micro enterprises .
AMERICAN POST CIVIL WAR RECONSTRUCTION
The American brutal civil war finally came to an end on April 9,1865 when General Robert E. Lee
surrendered to the north country .The Americans came to discover the magnitude
of the social and economic damage was far inestimable especially for a nation
already in its glorious path to industrial stardom .They were confronted with
the big question of how to rebuild the war-torn economy .Their challenge was to build the
world most powerful industrial
superpower and building the largest
economic powerhouse means unseating the British economy into distant
obscurity .And so they turned to entrepreneurship as a sport in the
reconstruction effort and took this challenge farther than any other nation in
the mortal history .
There is no doubt that during the post war reconstruction
effort some American entrepreneurs actually stood out with unmatched record and
indelible profile in their generation
for all time .These four barons can be regarded as the most ferocious
players during the period charting away out of economic horrors with the
most aggressive entrepreneurial and selfless disposition never seen in
the world prior to the period . Andrew Carnegie did not waste time transforming
the American steel industry into most competitive mass market worldwide while
cutting down the monopolists .In the oil industry, the strategic impact of John D.Rockefeller was extensively felt and a phenomenon until this day with a
stroke of master strategy transformed
the under developing nature of
the then industry into world behemoth today making America to consolidate its
leading status .He not only displaced the monopolists but extended his
distribution channels across the world mainly in China and Japan .
Particularly of note
John Pierpont Morgan holding history by the neck rewrote the pages of
American entrepreneurship from the backwoods and backwaters of history into world leading economy .He shoved
aside competition to become defacto world
central banker and America
central banker even before the coming of the Fed. .He was also a foremost
venture capital single handedly acting as intermediary par excellence and midwiving
crucial capital flows into American SMEs risking even his private capital to save his country from the
gold panic of 1893—95 and the successive stock market panic of 1907 .Like his
colleagues no deep seated patriotism can be better than this earning an
unrivaled place for themselves in the annals of American antecedence .
Starting from the grass root they rose beyond their borders
to become the envy of the world giving back to the communities, most of the wealth they had generated donating varsities schools , charities hospitals and libraries ,creating
a conducive environment for new generation of SMEs to thrive .
America as a result of these barons was able
to dominate the world using the economic power of SMEs to engineer her political power supremacy.
.Microsoft ,Dell ,Wal-Mart , Compaq , Hp, Home Depot , Intel ,MacDonald’s , IBM
, Gateway , Oracle , Apple and Cisco etc
all started as SMEs before transcending borders to become household names all
over the world .With one of the highest per capital income in the world it is
also the major source of private skilled workforce .
SMES AS THE
ENGINE OF THE
ECONOMY
In the U.K. . as well as the European union SMEs contribute
99 percent and 98 percent of private workforce .A total of 3.7
million business in the former and controlling 65 % of business turnover in the
latter . In most countries of the world according to ILO SMEs accounted for
over 60 percent of non formal sector employment .Most of the new jobs created
over the last 10 or 20 years in Europe
and America for example have come from SMEs .SMEs
accounted for over 80 percent of enterprises
in virtually all countries of the world .They also contributed 15—20
percent of the GDP in most countries .
In the European union it comprised of 98 percent of all enterprises .The 2001
ILO figures that over 150 million youths are employed and over 80 percent
living below 1 and 2 dollar a day can easily be taken care as SMEs develop
robustness vital to sustainable economic growth .
Coming down home to Nigeria , the federal bureau of
statistics shows that 97 percent of businesses employed less than 50 people . It produces 60 percent
of employment and output . They control
the informal sector which in turn
controls 70 percent of the economy .
Unfortunately SMEs mortality ratio is said to be 80 percent in the first five
years of operation . If indeed it is recognized that it accounts for 80 percent of
entire workforce in most
countries of the world , why then do the lips service continue in
succession for 5o years since
independence ..
Now ,we shall examine
briefly the challenges facing SMEs and Micro entrepreneurs in Nigeria .
THE FATE OF
SMES IN NIGERIA
Nigeria as a nation , quite unfortunate , quite
uncharitable and quite lackadaisical and super--irrational has been struggling persistently to revive
the fortune of SMEs since independence . Although we did a review of this
later but here cursorily also or in a cameo we appraise the failure of
industrial development centre established since 1962 among other similar
initiatives is still a national stigma till date in a country where policy
summersault and succession crisis is a way of life .
The first industrial development centre established during
the period by the then eastern
government in Owerri was taken over by federal government in 1970
.Subsequently ,other IDCs were founded in
Zaria , Uyo , Kano Osogbo, Benin city
, Ikorodu , Bauchi , Maiduguri, Port Harcourt , Akure and Ilorin .Just
like the DFIs , the politicization that came later deceitfully truncated this good initiative. The merger that came
also later in 2001 hardly survived and the bank of industry struggled to take off after years of wobbling
and vain restructurings .
The SMEs bankers private sector initiative took off during the merger at the instance of bankers
committee to invest 10% of PBT according to the guidelines into SMEs .It also
reminded us of similar or earlier ilk’s in the industry . The guidelines
regulating the scheme being highly
insensitive to the yearnings of industry did not help matter .It defines SMEs
as any enterprise with a maximum asset base of
500 million naira excluding land
and working capital . We could be talking of total asset value at 1
billion naira . Imagine for a start up
company ! Nevertheless the scheme was
approved in 1999 .This sounds unbelievable .Is this way SMEs are classified in
advanced countries ?
The investible fund
is for equity investment annually in both ordinary and zero coupon
non cumulative preference shares . It is
the industry contribution to federal
government attempt at stimulating the economy evolving local technology and
employment generation .It also includes
10 percent minimum credit to the micro enterprises . The CBN empowered
them to invest up to 200million in a
viable enterprises through fund managers excluding trading and financial
service business . This direct patronage should not exceed 40 percent of the
equity structure of such emerging enterprises
and has a duration in the form of venture capital .Whether by investment
syndication or ;loan consortium participation in large projects should not exceed the benchmark .
To make matters worse in the following review besides interest rates put at 9
percent the amount investible in a project was increased from 200m to 500
million naira while the asset base rose to 1.5 billion naira from
500million naira . This puzzles
industrialist entrepreneurs and needy businesses especially the inability to
secure 70 % of funding not to talk of
100 percent financing .And upon dilution of ownership holdings still expect
capital appreciation above money market rates annually .Institutional apathy
was aggravated even in the post consolidation era .According to Nigeria export
promotion council [NEPC] only blue chip companies still enjoyed unbridled
access to credit lines with reduced interest rates and not SMEs despite
increased liquidity in the system after consolidation .Going by this historical
and technical background the scheme is an elitist one and not one for the
masses and the interest rates for SMEs are in double digits as opposed to
single digits for prime borrowers in the economy .
On a more serious note , how do they classify or define SMEs in the
OECD region . The Small Business
Administration in the United
States defines it as ‘independently owned
’entity and ‘operated for profit but is
not dominant in its area of operation ’ . In the same vein companies in Britain are
controlled by company act 1948-1981. The
1981 act stipulates and designates certain companies small and medium .The
former having a turnover of more than
1million pounds or 1.4 million pounds p.a., asset less than 700,000 pounds with
less than 50 people under employ .These companies are independently owned like in America and are mandated not to
reveal turnover and profit to the public .In the same way with the Medium companies which have turnover less
than 5.75 million pounds ,assets less than
2.8 million pounds and employ less than 250 people . No outside interest
is in involved .This liberal lending policy encourages their economy to grow
.Today there are approximately 23
million of such businesses in America jointly employing more than 80 percent of
national private workforce contributing
more than half to the GDP . Infact according to Economist in 2006 , 99 percent
of the 26 million businesses it reported employ not less than 500 workers and
were agreed loans with no ownership dilution shareholding . This is what makes
American economy thick rather than the bulge bracket companies that we do focus
upon .SMEs are the secrets to her wealth as a dominant force in the international community.
It is a common knowledge that this policies lack grass root
sensitivity . In the capital market the objectives of 2nd tier
capital market could not be achieved and
the 3rd tier exchange that
came later followed similar fate .The recent launch of new alternative
investment market [AIM/PRIPEX] with insensitive and inadequate structure in a bad
system is bound to follow the same vomit .
DEVELOPMENT
ARBITRAGING RENAISANCE AND SME CREDIT
GUANRANTEE SCHEME
This is also evident in another new initiative to revive the
conduct of SMEs in the country . The federal government pumped 500billion to
the Bank of INDUSTRY to develop real sector and another 200billion naira to
develop agriculture and manufacturing
managed by elitist banks .Infact
like we earlier admitted the requirement is too stringent majority of SMEs and
the lower cadres will still be left behind and not catered for .They do not have direction and the policies
are not broad based reinforces the propensity of development arbitraging –that
is only very few will be benefited , leaving majority of SMEs behind . The
requirement for accessing loans with NERFUND , BOI ,the stock market and the
insurance sector or any DFIs are elitist . The latest 200billion SME credit
guarantee scheme [SMECGS] to promote credit access to SMEs and
manufacturers which would be funded 100%
and managed by CBN is to begin Nigeria ’s quest towards industrialization .The
fund is 80 percent guaranteed by CBN .Good ! But what about the
requirement ? The manufacturing and
agricultural value chain and SMEs assets shall not exceed more than 300million
naira employing between 11-300 persons . Good !
Certainly , sustainability will be a great future challenge
and the domestication of the initiative
in the language of the grass root must be considered .The investment prejudice and self centered parochialism of the local banks might stalled the
beautiful initiative .Moreso MFBs as the
right institutions are being bypassed .This could have been solely managed by
them in a separate financial system with
ancillary grass root oriented institutions .
THE BANKS
APATHY TO SMEs IN NIGERIA
We STILL find it hard
to apprehend that for every incentive provided by federal government to banks
to lend to SMEs has often met brick wall . They not only
demonstrated a discernible degree of reluctance against SMEs but also dubbed them as ‘HIGH RISK ’ . Hence a no go area . The
CBN credit guidelines for banks as
earlier emphasized to lend a given proportion of their loans and advances to SMEs especially agriculture started in 1979 .It was also 10
percent then and was subsequently raised to 16 % .Similarly in 1982 ,1983, 1984
and 1985 ,loans and advances to SMEs
stood at 206.7million naira , 351.30 m, 345.3 million naira and 977.2 naira respectively in a percentage
allocation of 2.0 , 3.1 and 7.9%.
Some of the problems faced by banks in advancing loans to
SMEs include the high mortality rate in the sector . According to a research
reports by industrial research unit of
OAU revealed lack of integrity in operation of such loans and Since they are dubbed a high risk
enterprise , loans to SMEs are
accorded low priorities in the lending scheme . The problem of adequately trained personnel is another
bone of contention . Inadequate skilled lab our and the owners are people with
little specialized skill or expertise neither do they have capacity or finances to hire expert to
manage the business either part time or full time .The consequence is that they
are used to producing faulty and insufficient
records .About 50 % of SMEs keep profit and loss account and
appropriate balance sheet on a regular basis ..The media research shows that
these lack of records or inadequacy in record keeping ordinarily influences lack of financial assistance from banks .The
inability to survive competition and the resultant low efficiency can be
deduced as natural consequence of poor book keeping or inadequate record
.keeping leading to mortality .
Although mismanagement is another problem, the above factor can also be regarded as part
of mismanagement , since information is
the livewire and blood system of
an enterprise . Lack of adequate planning , in that case they are mentally represented and
poor administration are common management problems . Poor marketing policies
with no adequate strategies and inadequate information can be waterloo to
business continuity and especially at death of the original owner , perpetuation of business becomes practically
impossible due to lack of previous documentation that could be instrumental to
business continuity .
Cash and stock are taken away at ease and for aggrandizement
.These are not recorded if taken as loans not refunded .No transparency no
accountability .Rather than paying themselves salaries from their
businesses or return missing goods and
cash the exuberance indulgence of the day truncate a potential business that
could have changed their communities and
touch many lives . It is a usual thing to mix their personal money with their
business wealth and then in the long run , the trade experiences liquidity
problems . Funny enough , most of these
businesses are not registered business and doing business with unregistered businesses is illegal .
Besides the problem of loan misapplication common among SMEs
, the problem of loan repayment as a
result of accumulation of arrears is another
teething lending disincentive . Loans are sometimes not repaid at all
even where business is generating sufficient funds to liquidate the amount borrowed or not
repaid on a scheduled basis . The misuse
and the misappropriation of funds and
the failure to repay the principal let the alone the interest reduced the capacity of lenders to go round another classes of people reducing
banks confidence for a prospective loans.
Most SMEs are highly undercapitalized and suffered from
inadequacy of capital and unable to raise money from capital market as a result
of their inability to meet the stringent
requirement of the exchange .
The loan recovery disability and inherent threats above all
is the leading factor in the business hardship
. Banks could hardly monitor
loans let alone recover fund after
lending .They are interested only
in their money
and hardly interested in personal advice to clients relegating SMEs welfare to the backburner .A banker is
only interested in loan legal action when matters have degenerated . Without
cooperation with the SMEs , the safety of the loans may be in doubt. Credit risk management expertise is grossly lacking in Nigerian
banks and a major bane in this dilemma .There is no doubt lack of innovation
was noted as the central predicament in
the Nigerian banking system and policy makers must apprehend this fact that the pace at
which SMEs grow determines the pace at which the economy grow .
Unfortunately the outlook for the sector is bleak across the
board .As the country prepares to join the top 20 biggest economies by 2020 and planning to grow by
13—15 percent SMEs sector is omitted and
not factored in the project .Serious attention to it is recommended if we are to
attain the perennially elusive development goals of SMEs project since 60s .MASAP projects
resolved this hurdle as it does for micro enterprises .
MICROENTERPRENEURS , MICROENTERPRISES AND THE ECONOMY
Micro enterprises in
most economies constitute the major
plank of the informal productive sector
and vital empowerment sources of a
nation . When neglected most economies fail to grow . They operate in the urban areas and the rural communities at a very small scale [Drake and Otterro
:1992] . Majority of the new workforce in the urban centers were consumed
by micro enterprises . It is seen
as the last line of defense in the
economy the first and the last hedges
of employment sources and
ultimate bridge between the formal sector and the economy .
While micro
enterprises accounted for half the
labour force in Lagos alone ,it
represented 30 % in Kenya in
the 70s and the 80s ( Sethuraman
:1981),it is as high as 50% in some
African countries . It
is generally proven that every morning
600 million people go to work for themselves . and often consist of a larger workforce in
the developing countries [UNDP:1997; 2] . Most job losses in the informal
sector were provided by this self propelling forces for sustainable economic
growth .It was provided to have provided
close to 14million jobs between 1992—2000 [Halverson Quevedo : 1992; 9
] .As noted by Lubell and Zarour
[1990:395] in the study of Senegalese formal sector that due to government harsh measures rose to
become the saving grace indeed of the country ’s formal sector job losses .
Writing in the book Microfinance and Economic Activity ,
Emeka Osuji concluded ‘many economies
are not growing at all .At best ,they are static if not contracting
.Various policy experiments in countries like Nigeria are taking toll on formal
sector employment’ .What would have
been the fate of this people loosing
their jobs on a daily basis ?To grow their activity is
to grow the economic prosperity in the long run creating friendly marketing
incentives to appropriately price development into sustainability . This corroborated Napoleon Bonaparte ’ s that the true worth of the state consists
in the number of its inhabitants in their toils and lab our .and industry.’
In Nigeria
today , there are approximately 90 million micro entrepreneurs and being greatly marginalized by mainstream
banks or financial institutions meant a dampener on economic growth . Moreover , according to Okinmadewa [1997]
and reappraised by Adeola [2001] in the schematic segmentation
of poorer classes in the country classified them into three classes mainly
: entrepreneurial poor ,Laboring poor , self employed poor and vulnerable poor .
The first class and type include the upper low and the middle income earners who were forced to operate micro an small business
due to harsh due to harsh economic climate ; mechanic shops hairdressing salons
, displaced workers , artisans , and unemployed graduates .
The self employed poor
are dependent on the first class for their survival or livelihood . They
include street hawkers vendors , petty traders
, shoe blackers or polishers and
mechanics .The third class constitutes the
largest category and population of the poor in the country including
security men ,gardeners ,household workers , conductors and street hawkers . They are manual daily paid workers in the
rural and urban areas .The least being the vulnerable poor who actually are
those that demand social support
programme designated with safety nets . From the invalids to the women and
children fall into this class .At this category the female headed household are
a potential micro entrepreneurial resources and may demand for creditor loans
like other classes for set up and for expansion .
The author affirmed in the piece Microfinance , Micro
enterprises and the economy a postscript in National Mirror [Jan.11,2008 ] that
apart from entrepreneurial poor, with a bit of attention ,none of the poorer
classes are well catered and adequately represented …..especially even with the coming of microfinance banks in Nigeria. He
concluded the lending policy being illiberal lacks grass root content .Again,
‘Micro enterprises’ according to Osuji [2006] ‘are often full time activities
which provide the primary source of
employment and income for the operator and the dependents . These business
units have been described as the economic activities of the poor because of the
predominance of the poor in running them’ . And due increasing retrenchment in
the formal sector the people are now taken their fate in their hands finding
relief on the other end of the spectrum
most ignored by elitist policy makers and politicians ..This insensitivity had
been a major factor behind prevalence of
poverty in the country .
Today approximately 15
million Nigerian graduates roamed the streets with no jobs no skills and no
means of survival in a country in which 90 % are poor should we use UNDP
poverty profile concept . This is no giant of Africa and funny enough according to one man is indeed ‘a cockroach of Africa’ .The mainstream market
is elitist do not cater for them and they need to find their bearing with
appropriate system .
MSMEs
REGULATORY BOTTLENECKS
As we earlier emphasized the development of small medium
enterprises scheme popularly known as Small and Medium Industries Equity
Investment Scheme [SMIEIS ] is a product launched in partnership with CBN in
2001 for acceleration of development in the sector .Each participating bank is
expected to monitor guide and nurture the enterprises and for ease of
administration and each institution shall
have small scale industries unit with responsibility to appraise and
recommend relevant SSI proposal . To also monitor compliance other criteria
required are :
1.Rendition of quarterly returns ;
2. Rendition of full
particulars of acquisitions any SSI shareholdings in any SMEs .; [Note: the
acquisition mentality here and non-liberal lending policies is a major defect
in the scheme contrary to free loans with no dilution attachment in developed
region .]
3. This must be undertaken within 21 days of the
acquisition .
In collaboration with United Nations Development Programme
[UNDP] the national policy for the
development of MSMEs took off in 2007
.subject to approval by federal executive council [FEC] on may 9 ,2007 . Prior to take off attempts at entrepreneurial
development were haphazardly implemented and was meant to be a widely accepted
policy document to develop the sector .What had earlier started as a scheme was
later formed and transformed into an institution
with the coming of SMEDAN to provide
direction and fill existing vacuum . The earlier scheme according to media
reports by 2006 had created some 500,000 jobs and invested the sum of 18.1
billion naira or 47 .3 percent of the total amount of 40 billion naira that covered in 258 projects
which cut across 24 states of the federation including FCT with the real sector
and tourism consuming larger chunk of the money .Though this had been worthwhile but nevertheless paled into
insignificance the escalating demand for loan that financial standard a local
publication estimated at 438billion naira [March 1,2004 ] .More so as the
stringent requirement during the period
for accessing the loan or cheap finance had stalled the lofty goals behind the
scheme which was meant to be temporary pending
the maturity of microfinance banks
.Only few fund managers distributed a reasonable percentage to the needy
sectors investing in trading and merchandising contrary to requirement ..
The coming of SMEDAN
with its broad strategic policies touched key
programmes’ issues .In the study
by Obajaja [2008] this included land use planning ,contract enforcement
,property rights, tax administration and dispute resolution . While second area
or sector touches research and
development and technology the third covers extension services and support
services .Infrastructure , marketing and finance fall in the last section
.Micro food processing , arts and crafts in the cottage level ,textile and
clothing , metal fabrication ,basic metal, electronic, InfoTech, leather and
leather products , construction
,physically challenged people , HIV/AIDS, Furniture and solid minerals etc are
classified as quick win situation under special target enterprises [STE] .
These are the legal , institutional and regulatory framework covered
under the SMEDAN national policy document .
Policy analysts such as Obajaja among others have contended
Inadequacies in the legal and regulatory
framework that persisted with the emergence of SMEDAN inhibiting the growth of
this sector .inadequacy in property
rights ,poor bankruptcy laws and leasing contracts , incompetence judicial
system such as inadequate enforcement of prevailing laws and commercial
contracts .This is regarded as legal instability common all over the world ,
increasing corruption and lack of commercial law . To redeem collateral
may take one year or two .The challenges facing government at this stage include
:
1. inadequate capacity building
2. poor coordination between various
forms of government
3. World bank MSMEs efforts towards
intergration of tax and business registration procedures , reducing corporate
registration transaction costs , improvement of
leasing regulatory framework and
development of alternative dispute resolution mechanisms etc put together is
grossly inadequate without a direction and a
national financial system to complement mainstream market in
redistributionist multiple financial system
. The micro financial system should cater for the poor and the highly
underserved grass root market and informal sector economy with its unique political , legal social and economical
complexes
4. Above all , what started as a scheme later into an
institution [SMEDAN] can now
metamorphose with allied institutions
and regulatory agencies and subsidiaries into a national micro financial system
.One for the poor and the other elitist for the rich with different rules since
their thinking nature and orientation
are vastly different which could also engage in cross border domestic investment
for national development .This would also guide against the gross deceit and
vast immobilization of the grassroot wealth to the service of the rich without
leaving them empty and making them
poorer .The poor man’s money must work for him.
As a result of this unrealizable proportion , the
inadequacies in the legal , institutional and regulatory framework had
persisted for a long time and not supportive of MSMEs and can never be
supportive of the sector and sustainable economic growth .. .There is no
appropriate legal and regulatory frame work that can be created unless this
challenge is surmounted .Laws , regulation , access to finance, growth incentives with basic legal protection and investors
confidence can easily be protected .
This is vital for Nigeria and the rest of developing
territories when taken into consideration the peculiar characteristics and the
kind of development impediment facing
these territories in the global markets
. Effective use of capital mobilized
into SMEs will be based on the nature of
unique development system . There is no need to replicate foreign regulatory environment here
in NIGERIA
or an attempt to agree with international best practice that at best were found
to be inimical long term growth in the country . This system will determine the nature of
laws and regulation s and institutions that will stimulate SMEs and Micro
enterprises needy access to cheap
finance .. The entire laws guiding the sector must be reviewed and introducing
new ones tailored to the needs of the grassroots through which they were designed .The aims of the system
includes;
1.Make every willing economically active Nigerian self
sustain ant and a micro capitalist.
2. Abolish prevalence of
mass poverty .
3. Make government
activity felt in the grass root ;
4.Develop informal
sector market economy with distinctive model;
5. Above
all, ensure universal prosperity for the people and not capitalist
prosperity for the few .
SMEDAN AT A
CROSSROAD
Smedan did recognize
the importance of MSMEs in an economy
especially its clime in which the marginalized
MSMEs do not have access to
finance even though it contributes 70 percent
of working population and 50 percent of GDP .Given the fact that it has a better
structure is still inadequate to tackle myriad of challenges in the
industry To make the matters worse ,definitely it does not even have a broad strategy to reach out to them
,even though it claimed to do so
.According to the Director general
Muhammad Naadari the strategy to touch the sector rested largely in its
partnership with NERFUND and MFBs .These
are institutions that are already near comatose and dead entities
among others to execute the plan
of going round these classes .Reorganizing Smedan with similar allied bodies
and instutions into a coherent system is
a panacea to the brewing storm . It will
take care of 90million microenterpreneurs left unattended to by the latest
SMECGS and even salvaged the sinking ship of formal financial system . A system
that caters for all answers all .
UNPRECENDENTED
REVOLUTION IN WORLD HISTORY : THE NIGERIAN MIRACLE
With this ideology and adoption of neo Marxist free market
economy as the most inclusive free market model [new generation—dual band ]
ever contrived by man with its peculiar
Para --macroeconomic models is a
foolproof for every willing Nigerian to become a capitalist and a salvation
crusade especially for the developing region. The GDP can grow conservatively on the average 10 times to
more than 20 trillion prior to maturity
of Vision 2020 rather than the lethargic
projection of 900 billion dollars in a
period in which China alone if adopted this model could grow
or be far bigger than the present
size of world GDP .Our leaders are blind
.They hardly see nor can distinguish
between black and white .That is their glory –a great ignorance
and they cherish it shamefully fighting
in the house.
This rough calculation
does not include other markets noted in Nigeria nor even a full analysis
of microfinance vs. population market
but noted briefly the spread in
government activities over the informal sector while allowing informal sector
to retain its clumsy nature helping to refine and polish it and being guided with relevant rules suitable
to development of the grass root and orientation of the poor .It means in a decade or within 20 years the
nation can catch up with America .Economists and myopic policy makers may ask :
Are you crazy ? But that is the gospel
.It means in a decade based on the seriousness of political capital or state
will the Nigeria could become a world
leader but we are perpetually such an unserious nation .In a
decade period , the U. S. GDP can never be more than 30 trillion let
alone 40 trillion based on the rate at
which it is growing and the available
macroeconomic model being used which is
outdated or has outlived its model utility
curve would not augur well to salvage her sinking ship .We are doomed if we keep endorsing
international best practice and neoliberalism
that could not prevent the meltdown in America .
More so as it has reached a saturation level or its peak .In
the next 50 years whether the model is adopted or not none of the advanced
countries will be among the world
leading economies even with their weapon of mass destruction .It will be worse for the world should this
solution not adopted .
Nigeria has potential to shoot even higher if we include all
other identified markets and we carefully embrace local content , indigenization
policy of 70s and extremely domesticate
local capital and nurture community and sovereign wealth funds around the world
.Take a look at Lagos or Delta unarguably the richest states in the country ,
they should be able control GDP of say
1.5 or 1 trillion dollars . Lagos does not need an
introduction anymore as a popular state with a GDP of less than 4 trillion
naira or 2.5 trillion .But the natural gas in Delta state alone
contains over 40 trillion scf . which is far higher than similar wealth .
in the United States
put together .At least we can a feel it , how richer it could be if tapped or exploited . Unfortunately by 2006
it was reported Nigeria had lost over 100 billion dollars since commercial
production started in Oloibiri in 1960s –more than 12trillion naira at
conservative prices .Nigeria is loosing trillion of dollars [not naira-get it
right ] due to ongoing capital flight
crisis and highly retarded capacity building endeavor since independence .Such model can also make
the nation sensitive to this missing link .
This is NIGERIA time to
SHINE as late comers to development like elsewhere in the developing
countries .Let us forget sentiment and
adopt this model .We are building
economy without tears or economy made easy for all irrespective of social
status , tribes , races and diverse culture and nationalities is a unifier and
especially explores the nation ’ s unique demography . It banishes social , political and economic instability , eradicate
crisis , eliminate armed robbery and social inequality to resolve every social disease and make the
nation safer to live and secure to abode
. What else again do we want or are we waiting for ?
