‘Double digit interest rate is not good for MSME operators’

Prince Rotimi Ogunleye, Commissioner of Commerce, Industry and Cooperatives, Lagos State, in this interview with BusinessDay speaks on the recent trade fair and other challenges facing Medium Small and Micro Enterprises (MSME). Excerpt…

What is the essence of the last fair for the MSMEs?

The rational behind the fair was to give the MSME platform to exhibit their goods because of the problems we have in the country, which is the existence of mono product economy. We have come to realise that the Nigerian economy has to be diversified. Because of my experience and many years of study, I know that MSME sub-sector is a vital tool for economic transformation and development.

So, we came up with this idea that SME should be given platform to display their goods, so that people could see them and that could assure them patronage. In Lagos alone, we have over three million MSME. Our Governor, His Excellency, Akinwunmi Ambode gave us the approval to go ahead and we decided to put in place the fair for them between May 3 and 8, this year, to display what they are producing.

Can you say that you have achieved your objective of organising the fair for the MSMEs?

Many of the operators in the sub-sector were happy that they have that platform and over 125 people came to participate in the fair to show their products. If not for the space, they would have been more than that and we could have recorded thousands of them at the fair. That is why our governor said that the second edition should be done in a bigger space.

The patronage and the response were very encouraging and it shows that operators in this subsector were waiting for the platform to display their goods.

In terms of policy, what are the policies being put in place by your ministry to assist the SMEs that participated in the fair?

I have told you about the platform provided by Konga-the e-commerce operator that listed them on its platform. This is to make it possible for any interested party to see their products and make order. From us in government, we have incentives for the operators such as the N25 billion packaged by the government, to assist the SMEs. Out of this, N6.25billion will be put in charge of board of trustees in charge every year for the SMEs to access. It is three per cent interest rate and it is the cheapest you can get anywhere.

We have also spoken to a number of financial institutions for the conventional bank’s loans. They have their own excuses because they have the minimum rediscount rate (now monetary policy rate) at 11% double digit. They will add their own margin, which does not allow them to come below the MPR rate.

But we have also spoken with the Bank of Industry because they have 5% interest rate, which we have encouraged the SMEs to look out for. Incidentally, BOI was also at the seminar to display their products. Their forms were available and they attended to people at the fair. We spoke with them to assist the SMEs at the fair.

I equally know that at the level of CBN, there is a pool of fund for the SMEs. Conventional banks should look at this in conjunction with the CBN, so that we give loans to the SMEs at a lower rate. We should not use the market rate for the SMEs because if we want to grow the economy and diversify it, we must develop the SME. The fair done by the Lagos State has shown clearly that the Nigerian creative spirit is high. Our people have the creative ability to produce locally made goods. The skill could be low because of lack of fund. This could have enabled them to produce on a larger scale. Financial institutions should assist the SMEs.

I was reading a story recently that there was SME intervention fund in CBN that was grossly under-utilised. Why should that be when we have a lot of SMEs looking for funds to develop products? If we want to assist the SME, we must make sure that interest rate on their loans is not more than five per cent. That is why Lagos State has used the benchmark of three percent interest rate for the SMEs and I believe that appropriate policy should be put in place to allow interest rate come down for the SMEs like what is down by Lagos State.

Gone are the days when people used to say that SME would only collect money to marry wives. Now, that mindset should be dismissed and we should do away with that prejudices. SME operators are serious minded people and they have shown that at the last Lagos fair as many item needed in the house were displayed at the fair.

Are you suggesting that CBN should bring down the MPR?

Yes. CBN should bring down the MPR for the benefit of SME operators. Double-digit lending rate is not good for these operators. If we are talking of diversification, the key lies in that sub-sector.

What are you doing to assist the SMEs to package their proposals to banks?

At the last fair, there was business clinic where agencies like NAFDAC, SON, LIRSI, FIRS and others attended to people and many operators were very happy. The fair was not only for them to display their goods but also for them to get services.