How CBN is strengthening youth entrepreneurship through intervention policies

Recently, the Central Bank of Nigeria (CBN) disclosed plans to write to the universities to begin to conduct a kind of entrepreneurship development competition programme.

Subsequently, the CBN would develop a framework under which this can be done. The essence of this is to stimulate entrepreneurial skills among youth.

“Given our population growth rate and the large number of our graduating students, we need to begin to see how SMEs can be incubated because it is from Small and Medium Enterprises (SMEs) that develop into large corporates and that is how they become great companies of the future,” said Godwin Emefiele, governor of the CBN.

He advised the universities to get the students to embrace entrepreneurial skills in agriculture using digital technology, adding that agriculture remains the most profitable business he has ever seen.

The CBN governor pleaded the Bank’s readiness to increase its development finance interventions to further support start-ups and SMEs in the country.

In its five year policy thrust, the CBN stressed the need to extend its intervention support to youth populations who possess entrepreneurship skills in the creative industry.

The CBN has been intervening in critical sectors of the economy to spur growth and create jobs for Nigerians, especially the teeming youth.

Data from the National Bureau of Statistics (NBS) show that Nigeria’s unemployment rate as at the second quarter of 2020 stood at 27.1 percent with the Youth Population accounting for about 64 percent of total unemployed Nigerians.

Admittedly, the role of the SMEs in strengthening national economies and creating jobs cannot be overemphasised.

Globally, SMEs are considered key drivers of industrialization and agents of socio-economic transformation.

In this digital age, according to Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), they are recognized as the backbone of national and economic development due to their significant contributions to Gross Domestic Product (GDP), through employment generation and poverty eradication. They also promote investment and wealth creation, equitable income distribution, export promotion, technological innovation, industrial diversification and value addition to local content.

SMEs account for about 90 percent of total enterprises in most countries. For instance, the OECD reports that 98 percent of Chinese firms are SMEs, contributing around 68 percent to exports and a whopping 60 percent to China’s GDP, while employing 75 percent of the Chinese workforce. The experiences of Japan, Korea, Indonesia, Philippines, Thailand, and Hong Kong are like China, with about 90 percent of their industries classified as SMEs. In South Africa, over 90 percent of businesses are SMEs, employing about 60 percent of the country’s workforce and contributing about 52 percent share of GDP.

Available surveys by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) indicate that Nigeria has over 40 million micro, small and medium scale enterprises. These enterprises are distributed among 5 main economic sectors namely, manufacturing, wholesale and retail trade, education, agriculture, and food services. It is important to note that about 90 percent of these SMEs operate in the manufacturing sector, which influences nearly 50 percent of all industry employment.

Despite the strides recorded by SMEs, there are still challenges that hinder them from realizing their full potential in Nigeria. Some of these challenges include lack of access to capital; poor infrastructure, weak managerial and organizational skills; low adoption of technology and innovation and poor knowledge networks.

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In order to address these challenges, the CBN has rolled out massive developmental interventions in some critical sectors of the Nigerian economy, especially in agriculture, manufacturing and SMEs. Attention has also been paid to advancing knowledge and innovation through various initiatives targeted at promoting youth’s entrepreneurship, research and development.

The CBN has launched several youth investment-friendly programmes and interventions to empower Nigerian youths with necessary inputs to build successful SMEs and other businesses. One of such schemes is the Youth Entrepreneurship Development Programme (YEDP) which was launched in 2016 to enhance the deployment of the ingenuity and resourcefulness of Nigerian youths to achieve maximum economic development. Under the scheme, a total of N173.4 million has been disbursed to over 67 beneficiaries.

The target beneficiaries are members of the National Youth Service Corps (NYSC), non-NYSC (but with not more than five years post-NYSC), holders of verifiable tertiary institution certificates, and artisans with First School Leaving Certificate or a technical certificate or accredited proficiency certificate from the National Board for Technical Education (NBTE).

Relatedly, the Federal Executive Council on the 22nd of July 2020 approved the sum of N75 billion for the establishment of the Nigeria Youth Investment Fund (NYIF) for the period of 2020 – 2023 to be funded by the CBN. The objective of NYIF is to improve access to finance for youth and youth-owned enterprises for national development. Under the scheme, N2.04 billion has been disbursed to 7,057 beneficiaries, of which 4,411 were individuals and 2,646 SMEs.

Furthermore, the Bank established the Creative Industry Financing Initiatives (CIFI) aimed at improving access to long-term, low-cost financing to entrepreneurs and investors. It covers a wide range of sub sectors in the creative industries, some of which include movie and music production, fashion and ICT. Among the target opportunities is the graduate software development loan. While the disbursement is in phases, in line with the agreed milestone, a sum of N3.1 billion has so far been disbursed to 341 beneficiaries.

Another area championed by the Bank towards SMEs development relates to entrepreneurship and youth training. In 2006, the CBN in collaboration with Small and Medium Enterprises Agency of Nigeria (SMEDAN), National Directorate of Employment (NDE), National Poverty Eradication Programme (NAPEP) and Industrial Training Fund (ITF), began the establishment of Entrepreneurship Development Centre [EDC] across six geo-political zones of Nigeria. The centres were mandated to develop entrepreneurship spirit amongst Nigerians and provide insight into the tools, techniques, and framework for managing all functional areas of business enterprise, including production, marketing, personnel, and finance. These initiatives have significantly helped to bridge the skilled labour gap among SMEs.

Other schemes and initiatives introduced by the CBN in terms of development finance interventions to directly support SMEs, the SME Credit Guarantee Scheme (SMECGS), Micro, Small and Medium Enterprises Development Fund (MSMEDF), and Agri-business/ Small and Medium Enterprises Investment Scheme (AGSMEIS). Others are the Entrepreneurship Development Centres (EDCs), National Collateral Registry (NCR), Creative Industry Financing Initiative (CIFI), Targeted Credit Facility (TCF).

The YEDP aims to fix the triple-barrelled constraints of insufficiency, high cost and inadequate term of capital usually faced by youth entrepreneurs and start-ups. It offers credit of up to N3 million to eligible youth or N10 million for groups of 3 – 5 youths, Interest rate is 9 percent per annum. Tenor broadly depends on project complexity and cash flow but is between 1 year for working capital loan and 3 years for term loan. The collateral requirements are quite simple: academic and NYSC certificates, third party guarantees and other movable assets.

The Guidelines for the programme indicate that activities eligible for financing include startups and expansion projects in agricultural value chains (fish farming, poultry, snail farming, etc.), cottage Industry, creative industry (tourism, arts and crafts) and Information and Communications Technology (ICT) among others.

Lack of financial access is the main bottleneck for the growth of Micro, Small and Medium Enterprises (MSMEs), and the risk of their survival, according to Akinwumi Adesina, president, African Development Bank (AfDB).

“This is because financial institutions simply do not understand their businesses and tend to overestimate the risk of lending to MSMEs. This has led to MSMEs financing gap in Africa estimated at $330bn, and left 51 percent of the continent’s 44 million MSMEs without the financing they need to grow,” he said.

Investing to equip women and youth entrepreneurs with skills, resources and mentoring will drive Africa’s growth, according to ministers, bankers and development experts, who participated in a recent event organised by the Economic Commission for Africa (ECA).

“Africa’s economic growth and prosperity depend on the ability of its entrepreneurs to turn their ideas into successful businesses,” said Edlam Yemeru, ECA’s Chief of the Urbanization section.

Africa’s high unemployment rate of 15 per cent particularly affects women and young people. “Entrepreneurship in the digital era offers an enormous opportunity to create new jobs and enhance their participation in paid activities. To unlock this opportunity, our focus should be on women and young people,” she said.

Yemeru described “robust data on entrepreneurship, access to finance, enabling environment and skills development” as core ingredients that could help women and youth-owned businesses to survive and thrive in Africa.