In the span of few months, the COVID-19 health crisis has become an economic crisis.
In response, President Muhammadu Buhari constituted the Economic Sustainability Committee (ESC), headed by vice president, Prof Yemi Osinbajo to inter alia: develop a stimulus package and come up with measures to keep the economy afloat in the face of the COVID-19 economic disruptions.
The House of Representatives had earlier passed the Emergency Economic Stimulus Bill 2020 on March 24 to provide support to businesses and individual citizens of the country. The proposed law aims to provide 50 per cent tax rebates to businesses that are registered under the Companies and Allied Matters Act so they can use this saving to continue employing their current workers. However, while the bill focuses on providing relief to formal sector businesses, 65 per cent of the nation’s total GDP comes from the informal sector, which also employs more than 90 per cent of the workforce, and these workers need support to survive.
Many businesses in the informal sector are unregistered so it would be difficult for them to get these benefits. These businesses are often supported by microfinance facilities. For the government to help, it would have to use small interest-free loans or small grants to these enterprises through microfinance facilities and other community-based channels.
So, consequently, the ESC drafted and presented the Economic Sustainability Plan (ESP) which was approved by President Buhari. Embedded in the ESC are copious step by step interventions under the MSME Survival Fund.
Speaking recently on the interventions, Osinbajo said that the federal government remained deeply committed to creating a more business friendly environment for MSMEs to thrive, as they are the engine room of the Nigerian economy.
Osinbajo said the survival of MSMEs is a key component of the ESP. He said that President Buhari’s approval of the implementation of the MSMEs Survival Fund as part of the ESP was to cushion the impact of COVID-19 on the economy.
According to the VP, the Buhari administration’s commitment to the success of small businesses was evident in its MSMEs Clinics initiative.
Mr Tola Johnson, special assistant to the President, Office of the vice president, elucidated on the small businesses palliatives at the recent inauguration of the Implementation of Survival Fund and Guaranteed Off-Take Stimulus Schemes for MSMEs in Abuja.
The special assistant, who is also the project coordinator, said the schemes would go a long way in mitigating the impact of COVID-19 lockdown on businesses.
Intervention Comes On Stream
On September 21, 2020, the minister of state for Industry, trade and Investment, Ambassador Maryam Katagum delivered the much-awaited economic package.
She announced the commencement of a nationwide implementation of two MSME initiatives namely; the N75 billion MSME Survival Fund with the Payroll support track as the first scheme to roll-out (N60 billion) and the Guarantee Off-take Scheme (N15 billion).
Both schemes are at the core of the N2.3 trillion stimulus package (also known as the Nigerian Economic Sustainability Plan (NESP) being implemented by the Buhari administration to help cushion the impact of the COVID-19 pandemic with a view to boosting the economy by saving existing jobs and creating new job opportunities.
The minister explained that the MSME Survival Fund is a conditional grant to support vulnerable micro and small enterprises in meeting their payroll obligations and safeguard jobs in the MSME sector.
The scheme is estimated to save not less than 1.3 million jobs across the country and specifically impact on over 35,000 individuals per state.
She said the nationwide lock-down, though critical to “flatten the curve” and help the relatively inadequate health system prepare and cope with the health crisis, has adversely impacted the economy and in turn the financial sector.
She also stated that the massive fiscal stimulus would help improve the impacted financial system and that the positive business perception would stimulate demand, adding that the economic relief plan would alleviate the sweeping distress in the Micro, Small and Medium Enterprises sector that lies at the heart of the industrial ecosystem and commands an estimated 86.3 per cent of employment (59.6 million jobs).
The government in announcing the stimulus package underlined that it is important however that such a package focus not just on providing temporary relief through short-term liquidity infusions, but also go beyond, to address medium- and long-term issues that would test MSMEs resilience.
The overarching theme, she further explained is that of infusing liquidity and engineering a pass-through effect that ultimately puts more disposable funds in the hands of both entrepreneurs and employees.
Guaranteed Off-take Scheme
On Guaranteed Off-take Scheme, Katagum said it would ensure continued local production and safeguard 100,000 existing small businesses to save 300,000 jobs.
Priority products include processed foods, personal protective equipment, hand sanitizers, face-masks, face-shield, shoe-covers and pharmaceuticals.
The implementation committee chaired by minister Katagum, would collaborate with private sector MSME associations to verify and screen applications from bidding MSMEs, define quantity and price of products required, and also get participants to join in the procurements.
According to her, both MSME Survival Fund and the Guarantee Off-take Scheme have provisions for a 45 per cent female business participation and special needs participation of 5 per cent.
The benefiting companies must be registered in Nigeria under the Corporate Affairs Commission (CAC); must have a BVN by company CEO; must have a staff strength of no less than 3 persons; must be owned by a Nigerian.
Also self-employed individuals in the following categories; service providers in the transportation sector, i.e bus drivers, taxi drivers, ride share drivers, (Uber, Bolt (Taxify) etc) and mechanics, artisans, electricians, plumbers, etc
The minister said the aim of the intervention is to inject liquidity into the financial system, revive the economy, limit the impact on the labour market and boost confidence.
The Payroll Scheme
A recent survey of 5,000 MSMEs (micro, small, and medium enterprises) found that 71 per cent of them could not pay salaries to their workers in March 2020 due to the COVID-19 lockdown in the country.
With severe supply-chain disruptions, especially for those businesses that do not manufacture or provide essential services, the capacity to continue paying workers (without any reductions) during the lockdown, as per government directives, looks bleak.
Reports from across the country raise similar alarm bells for how these businesses are unable to meet immediate capital requirements.
To this end, the federal government on September 28, 2020 commenced the registration for another track of its N75 billion MSME Survival Fund, the Payroll Support for MSMEs.
The portal is to help with the digital registration, onboarding and monitoring of Micro, Small and Medium Enterprises (MSMEs) for the government’s Survival Fund programme. The programme includes Payroll Support, Guaranteed Offtake and MSME Grant.
Katagum said that under the Payroll Support category, government would support MSME payroll obligations by paying between N50,000 and N30,000 to between three and 10 staff for three months.
She said this category would target 500,000 individual beneficiaries in the hospitality industry, private schools, factory owners, law firms, hospitals etc.
LEADERSHIP reports that the registration for the payroll support started with the educational institutions at 10 pm on Monday, September 21, 2020, and was followed by businesses in the hospitality industry on Friday, September 25, 2020, while registration for those in the artisan/transport category opened on October 1, 2020 according to government schedule.
The minister also said that special focus would be given to 45 per cent female- owned MSMEs and 5 per cent special needs- owned MSMEs.
Criteria For Participation Under Artisan/Transport Category
According to the minister, the criteria in this category for qualification is that MSMEs desiring to access the grant must belong to an association, in addition to possessing a Bank Verification Number (BVN).
“We are using BVN to ensure that people don’t duplicate registration with associations. It is one person to one association. When you belong to an association, you will be given a unique association number. Enumerators will approach your associations. Your association leaders will take your name to the enumerators,” she further explained.
Responding to questions on micro businesses that may not be able to join any association to access the grant, Kartagum said that government acknowledged that in introducing such financial and safety net measures as well, the real challenge would lie in identifying 63.4 million unincorporated MSMEs, of which 99 per cent are micro-enterprises that remain largely informal.
She explained that informality in the MSME sector exists in both the nature of businesses and the relationships that businesses and workers share.
Citing a recent review of 2017 survey of the National Policy on MSMEs revealed that there were 41.4 million MSMEs in Nigeria, with about 99 per cent of them belonging to the micro sub-sector, Katagum said that apart from having this categoy of business group already captured in the stimulus package, there was the need for more sensitisation so that more can enroll into the programme.
The minister noted that the scheduling of the registration for prospective beneficiaries is to ensure that the process is seamless and hitch-free.
According to her, the registration of every sector is to continue until Thursday, October 15, 2020.
In a remark, director-general of Small and Medium Enterprises of Nigeria (SMEDAN), Dr Dikko Umar Radda, said the administration of President Muhammadu Buhari, has genuinely demonstrated its commitment to the growth and sustenance of the MSMEs in the country.
Radda said as measures to support the growth of MSMEs, the federal government has established a number of schemes geared towards providing finance at low-interest rates including the establishment of a N500 billion COVID-19 crisis intervention fund. The fund was introduced to upgrade healthcare facilities and administration in the country.
The fund is also to be used to provide intervention to various state governments and also take care of special public work program that is being implemented by the National Directorate of Employment (NDE).
Radda also mentioned the N-Power scheme set up by Muhammadu Buhari since 2016, to address the issues of youth unemployment and help increase social development.
According to him, the scheme was created as a component of National Social Investment Program, to provide a structure for large scale and relevant work skills acquisition and development and to ensure that each participant would learn and practice most of what is necessary to find or create work.
Radda, who also noted that in the face of an unprecedented crisis brought upon by the pandemic, the Survival Fund package could lay the foundation for economic revival in Nigeria, underscored the importance of the MSME sector.
According to him, a 2017 report by the National Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), showed that MSMEs in Nigeria account for over 95 per cent of all the businesses.
He described the N75 billion MSME Survival Fund as the latest effort by government to provide bridge financing to MSMEs.
The DG therefore, charged participants at the event to sensitise their members towards enrolling for the scheme.
He further explained that the gesture is to cushion the impact of the COVID-19 pandemic on MSMEs.
Many MSMEs have welcomed the move and believe the measures would help streamline their operations positively.
Edward Okere , CEO and co-founder of logistics startup in Abuja shared the same thoughts that the relief package would allow movement of goods and services and benefits the logistics sector.
“The N75 billion economic package announced by the minister is a morale booster in itself. Living with the new normal and the reforms are going to be game-changing for the supply chain industry.
“The majority of logistics is dependent on the manufacturing sector, these options announced by the government will allow them to resume operations and thus resuming the movement of goods which in turn will be beneficial for the logistics industry too,” he said.
Apart from logistics, startups such as Tradeworld had also taken to provide a B2B marketplace for MSMEs, connecting buyers and suppliers and helping SMEs go digital.
While lauding the measures announced by the minister, Onyebuchi Onyagoro, COO, Tradeworld, was also impressed by the government’s mission to go local as he believes this would encourage manufacturing and reduce the country’s dependence on imports.
“We are incredibly encouraged that the economic stimulus package is focused on local shops – who are responsible for 40 per cent of employment and drive more than 90 per cent of retail commerce. It will ensure we restart the economy from its foundation, and build an even more locally-driven shockproof system for the future.”
Mrs Gloria Onomene, a pottery maker said, “With today’s comprehensive set of announcements, the stage is now set to rebuild the MSME sector and the economy.
“Listening to the minister and the series of measures spelt out gave us the confidence that our government is ready and will lead from the front in taking MSMEs out of the COVID-19 storm and emerge bigger and stronger.
“We are optimistic that these policies will help get the economy moving again and enable the industry to put millions of Nigerians back to work safely and minimise the spread of the coronavirus,” Biswal said.
Others, who also spoke with LEADERSHIP agreed that a friction-free implementation of these measures can slowly convert adversity to advantage.
LEADERSHIP findings also showed that in preparation to be on the driving seat of Nigeria’s economic recovery post-COVID-19, many MSMEs are already paying greater attention to collaborations and also re-thinking their business models to accommodate emerging opportunities.