…Spotlight on Roles of BOI, SON
BEVERLY HILLS, May 30, (THEWILL) – It has been established that the African Continental Free Trade Area (AfCFTA) agreement will unlock significant growth opportunities in Nigeria; then flow into the wider continental window. However, the benefit derivable from the single large market by Nigeria will depend mostly on adequate stimulation of the private sector. Stakeholders and industry experts insist that the active participation of small and medium enterprises (SMEs), will be beneficial – by providing linkages that lead to job creation and production or raw materials for domestic consumption and export.
The agreement will boost trade relations in Africa by removing tariffs for over 90 percent of goods traded between member countries. It will also to lead to the free movement of people within the continent, thereby fast-tracking a single market for air and road transportation.
The deal is seen as critical for growth and job creation for Africa and its 1.27 billion people. It is expected to reverse the trend of Intra-Africa trade, which has been historically low. Intra-African exports were 16.6 percent of total exports in 2017, compared with 68 percent in Europe and 59 percent in Asia. This suggests that untapped potential abound.
Enter Intervention Funds
Already, there is growing pessimism that Nigeria, on account of ‘natural’ productivity deficit, does not stand a good chance of reaping more benefit than cost from the scheme, at least in the short term. But the Central Bank of Nigeria intervention funds will go a long way in reversing the negativity. At present, there are many intervention funds, all sector- and industry-focused. They range from agriculture, manufacturing, aviation, tourism, power, service to micro, small and medium enterprises (MSMEs).
The funds include the Agricultural Credit Guarantee Scheme; Nigeria Incentive-Based Risk Sharing System for Agricultural Lending; Commercial Agriculture Credit Scheme; the N220 billion Micro, Small and Medium Enterprises Fund; and the Anchor Borrowers’ Programme, the Small Medium Enterprise Credit Guarantee Scheme (SMECGS), among others.
In February 20, 2017, the apex bank engaged in aggressive funding of the sub-sector through its multi-window forex intervention regime focusing on Wholesale, Investment & Exports, SMEs, Invisibles and Bureau the De Change segments, among others.
In its bid to ensure that businesses across all sectors of the economy sustained their operations aftermath the COVID-19 pandemic, the apex bank introduced several loan opportunities under its intervention arrangement. These include the AGSMEIS Loan For SME’S And Agricultural Businesses Without Collateral; Anchor Borrowers Programme (ABP) Intervention For Agriculture; Accelerated Agricultural Development Scheme (AADS Loan); MSMEDF Loan – Micro, Small and Medium Enterprises Development Fund; Creative Industry Financing Initiative (CIFI Loan); CBN Healthcare Research and Development Grants.
To achieve the desired capacity boost, the role of two institutions is critical. These are the Bank of Industry and the Standards Organisation of Nigeria. Their crucial role is seen from the prism of Nigerian MSMEs target export market for expansion and to earn foreign exchange.
Role of BOI
The Bank of Industry targets the industrial sector of the economy with the aim to encourage industrial production and value creation by manufacturing and processing activities of businesses. The objective is to provide the industrial sector with finance as well as business support services. Since these industries are mainly industrial, BOI is charged with providing finances to purchase equipment for value chain productions.
Leveraging on the CBN intervention schemed, the BOI would enter negotiation terms with the financial institutions for assisting in the application process for the loans for indigenous entrepreneurs whose participation impacts on Nigeria’s opportunity in the AfCFTA is important. The BOI is also tasked with ensuring that businesses succeed and grow. One way it does this is by ensuring that businesses applying for loans get these loans where and when they need them.
The BOI is also tasked with the management and disbursal of the Government Enterprise and Empowerment Programme (GEEP). This is a social intervention scheme set up by the Nigerian federal government to support small and medium-scale local businesses with interest-free loans to grow their businesses. The bank administers these schemes
Working with the commercial banks, BOI through its various programmes, supported over 14,000 youths in 2019. “Our greater emphasis now is really on Micro, Small and Medium Enterprises; we are all out to support them and going forward, this would be our continued emphasis,” said its Chairman Mr. Aliyu Abdulrahman on the sidelines of its 2019 Annual General Meeting.
According to him, in 2017, lending to SMEs was about N8 billion, but in 2019 the bank’s disbursement to SMEs rose to over N56 billion. It made a total disbursement of N53.0 billion to in 2019, a 56.3% year-on-year increase from N33.9 billion in 2018.
Dikko said that to further increase the bank’s capacity to support SMEs, “in the course of 2019, we made significant progress towards improving the size of our loanable funds, leveraging our strategic partnerships in the international market and the support of the Central Bank of Nigeria. The Bank was able to raise €1 billion through syndication by international banks for lending to SMES to create jobs.”
Role of SON
The key function of the Standards Organisation of Nigeria is to ensure that products manufactured locally in the country and those imported into Nigeria are standardized. With Nigerian entrepreneurs positioning to play active role in the AfCFTA scheme, there is need to guarantee quality assurance in their business processes. This will ensure steady export-oriented activities.
It is SON’s responsibility to ensure that industrial standards in Nigeria are established.. This see to it is very important in playing the support role in the AfCFTA programme, leveraging on the CBN intervention funds.
Nigerian businesses participating in the AfCFTA scheme will also benefit from the support of SON through its products inventory arrangement. Every product produced in Nigeria requires standardization, including those imported into the country. This further helps to strengthen the quality assurance opportunity available to Nigerian products.
The SON inspects products quality, materials and production facilities to make sure that the products quality and materials and facilities used in production are properly administered.
Even while inspecting these materials and facilities used in production of these products, it is also expected that SON institute or make provision for quality assurance system. That is why the Standard Organisation of Nigeria will take into consideration, the laboratories, and the factories, as well as, the certification of products.
The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, last year, stated that the only way Nigeria could maximise the benefits of AfCFTA is to increase the total value and volume of non-oil exports by scaling up productivity in the real sector of the economy. He said the quality of what Nigerian companies supply must meet international standard:
“If you look at the structure of our export, it is about 95 percent oil and gas, the remaining five percent is for agriculture and manufacturing, most of which goes to the neighbouring countries.
“If we are going to trade internationally, it is not just about import, it is also about export. So what exactly are we going to put on the table if the only thing you have is oil and gas? How will that benefit the economy?
“We need to scale up very rapidly, issues of productivity in the real sector of the economy are important. If we don’t strengthen that, we will not be able to get the right kind of value that we need to get.”
The Ministry of Industry, Trade and Investment says Nigeria has over 37.07 million MSMEs and they account for more than 84 per cent of total jobs in the country. The ministry further revealed that the MSME enterprises in Nigeria also account for about 48.5 per cent of the gross domestic product, GDP, as well as about 7.27 per cent of goods and services exported out of the country. According to Small and Medium Enterprise Development Agency of Nigeria (SEMEDAN), micro enterprises account for the bulk with 36.994,578 (about 99.8 per cent), while small enterprises took 68,168 and medium enterprises 4,670.
Well co-ordinated, operators of these enterprises could access CBN intervention funds and, with the assistance of BOI and SON, reap the benefits of the AfCFTA.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
