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T H I S D AY •THURSDAY, MARCH 24, 2016
BUSINESSWORLD
E-BUSINESS
Driving Diversification through SMEs, ICT The economic downturn has made it imperative for government and the private sector to breathe more life into the ICT and SME sectors for economic growth and sustainability, writes Emma Okonji Oil has been the mainstay the Nigerian economy leading to the neglect of other vital sectors of the economy. Agriculture, manufacturing as well as Information and Communications Technology (ICT) among other sectors get little attention from the government because of the oil boom. However, the global economic situation changed and the price of oil has crashed below $50 per barrel currently. There are fears that the price of oil may not get to the level it used to be in the near future. These fears have necessitated the thinking for a diversified economy for Nigeria, where some sectors of the economy like the Small and Medium Scale Enterprises (SMEs) and the ICT could be empowered to begin to generate money and grow Nigeria’s Gross Domestic Product (GDP) based on their huge potentials. PriceWaterhouseCoopers, in its report, projected that Nigeria’s GDP would rise to $6.4 trillion by 2050, if Nigeria diversifies and look beyond oil. The projection, no doubt, is based on the potential of several sectors outside oil, such as the SMEs and the ICT, among others. Need for SME growth Speaking recently on the need to grow SMEs in a diversified economy, the Country Manager, Google Nigeria, Mrs. Juliet Ehimuan, said the business about SMEs comes in a small and sizable level, but that they form a significant part of economic growth because majority of businesses fall within the SME group. According to her, if SMEs are empowered, they could create more opportunities for jobs and GDP growth. “SMEs are engine room of growth for any economy and their presence must not be neglected. For example, over 90 per cent of surviving businesses in Nigeria are SME businesses. So if empowered, they can do more exploits to boost GDP growth of Nigeria in sustaining our status as the biggest economy in Africa,” she said. She, however, explained that one in every five SME business owners regularly rely on personal funding for their businesses, while quoting a recent survey report, insisting that SMEs need adequate funding, aside training and other forms of support. The Scottish Pacific’s latest SME Growth Index also found that almost half of all SME owners have used their personal finances to fund their businesses on an occasional basis. Only 10 per cent of SME owners have never settled business expenses using non-business sources of finance, according to Scottish Pacific’s latest report on SMEs. The Chief Executive Officer of Scottish Pacific, Peter Langham, therefore called on various governments and the private sectors to consider the support for SMEs, while planning for the diversification of their economies. In line with economic diversification, MTN Nigeria, in 2013, launched a cloud service for SMEs in Nigeria. According to the company officials, MTN is the first telecoms operator to offer cloud services to small businesses in the West African nation. Speaking at the launch in Lagos, MTN Chief Enterprise Solutions Officer, Babatunde Osho, said SMEs in Nigeria could now use enterprise solutions without the usual attendant costs. The services, he said, could help small businesses boost their productivity and profitability, thereby boosting Nigeria’s GDP. “No matter what the entrepreneurs need, MTN cloud services can help take their business to new heights,” he said. MTN’s cloud service includes a range of prepaid cloud-based services designed to offer human resource management, customer relationship management and other enterprise software over a secure internet connection, without any of the associated information technology infrastructure costs. In 2015, MTN Nigeria offered most SMEs with access to its over $15 billion Nigerian investments through a joint partnership with the Cable News Network (CNN) International
Source: venturesafrica.com
that would help boost smaller businesses and electronic commerce platforms that are vital for economic growth and development. The Group Chief Enterprise Officer, MTN Group, Mr. Mteto Nyati, said MTN Nigeria has made huge investments in the biggest data centre and microwave backbone in West Africa, built sub-Saharan Africa’s largest terrestrial fibre optic backbone as well as connected the country to the undersea West Africa Cable System (WACS). Nyati, who disclosed this in Lagos during the launch of an MTN-sponsored programme on CNN aimed at promoting small African businesses, said the next phase is investing in Internet of Things (IoT) technologies that will help Nigerian and African companies understand customer needs and benefit from the dynamic internet industry. On the advantage of the MTN enterprise initiative as reflected in the partnership with the CNN, Nyati said: “MTN is passionate about developing SMEs and providing digital solutions to businesses around the continent. We feel privileged to partner the CNN to tell stories about how the African continent is taking part in the data revolution.” Aside these, the MTN Business, which is the ‘Business-to-Business arm of MTN Nigeria, has introduced various business solutions, products and services, designed to help individuals, SMEs and large organisations achieve their objectives. Some of the solutions include: MTN My Office, which is a bundled package of ICT solution services for SMEs; Fixed Broadband Internet; Closed User Group Voice Solutions, among others. Analysts believe that Nigeria needs more of these developments for it attain a paradigm shift from oil to non-oil sectors of the Nigerian economy. It has often been said that government has no business in business, and this is true to some extent. All that governments across board need do is to create the enabling platform for business to grow, especially for the upcoming SME business that are struggling to survive in a harsh competitive business environments. Government could do this by formulating the right policies that will encourage SME business, reduce unnecessary levies that impede business growth, introduce tax rebates, provide necessary infrastructure like electricity, good roads among others and also intervene in some business issues that will bring relief to business owners. For instance, the efforts of the Central Bank of Nigeria (CBN) in 2015, in releasing new
guidelines for its intervention funds, reducing its intervention rates to banks from three per cent to one per cent, is highly commendable, because such move did not only bring financial relief to business owners, but it also helped them to grow their businesses and increase the country’s GDP, thereby reducing the country’s over dependence on oil, which is gradually failing most mono-centric economy countries. The intervention rates, it was gathered, were part of the Real Sector Support Fund (RSSF), a programme set up to lend money to small and medium sized enterprises, and also help expand existing ones. Many banks shunned the fund from the CBN at the original rate of three per cent because it did not favour them. Banks usually lend money to businesses at the rate of nine per cent. Banks complained that that the six per cent difference in the rates was not enough to cover the risks of lending money to the targeted businesses and many banks, thereafter, became reluctant to lend from the CBN. That decision is already affected small and medium sized businesses in the country. But, according to CBN, the special intervention policy is set to encourage more small businesses, especially now that the Nigerian economy is set to be diversified. The RSSF would provide funds for businesses in sectors such as manufacturing, mining, and agriculture. It is therefore important that government begin to think of other ways to encourage SME business in Nigeria, to enable them contribute their significant quota to Nigeria’s GDP. Developing ICT One other sure way to diversify the Nigerian economy and increase the contribution of SMEs to GDP growth, is to develop the information and communications technology (ICT) sector. Telecommunication growth, which forms the bedrock of ICT, must be encouraged. The GSM operators like Globacom, Airtel, MTN, Etisalat and even ntel that is planning a rollout soon, should be encouraged. The regulatory environment should not be unfriendly to business growth and the issue of fine as a means of punishing erring telecoms operators, should be reduced. Other measures like compensation for the best telecoms network in terms of service delivery should be encouraged. Modern and latest technologies should be encouraged and not allowed to stifle the economy with unnecessary regulation. Telecoms levies from government agencies should be reduced and even expunged to enable operators raise enough money for
reinvestment in telecoms infrastructure. Approvals for Right of Ways (RoW) for telecoms operators, who are eager to expand their networks, should be given speedily without delay and above all, telecoms infrastructure must be protected from vandalism by government. Only recently, the Nigerian Communications Commission (NCC), had a roadshow in Lagos and other parts of the country, to sensitise the public on the need to protect telecoms infrastructure in their vicinity. If all these are well taken care of, telecommunications will witness tremendous growth that will replicate in job creation and SME growth in the country. For instance, the ICT sector, especially telecommunications, has had a significant impact on the other sectors of the economy perhaps most significantly, the financial sector. In commercial banking services, the level of transactions supported by telecommunications services is huge and several banks in Nigeria have benefitted from it. In financing telecommunication projects, the financial sector has done tremendously well as most banks are involved in one loan syndication or another. In the area of job creation, it is estimated that the sector currently employs over 10 million Nigerians directly and indirectly, and these are enough reasons why government must support the development of the ICT sector in a planned diversified economy. Private sector involvement In order to truly diversify the Nigerian economy, government must involve the private sector in Telecommunications, Banking, Insurance, Real Estate, Agriculture, among others. Their contributions, no doubt will help Nigeria depend less on oil, while focusing on other areas that will rapidly grow the economy. The Executive Vice Chairman of NCC, Prof. Umar Dangatta has advocated the use of ICT to drive the Nigerian economy. He said the current global oil prices are not favourable to the Nigerian economy and that the kind of money Nigeria is currently making from oil, cannot fund projects that are targeted at alleviating poverty. He therefore called for development of the telecoms industry, which he said, was the next thing that would drive the Nigerian economy. Telecoms operators like Globacom, Airtel, MTN and Etisalat, have developed several apps that would support SME growth in the country and they should be encouraged to do more in diversifying the Nigerian economy.