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Government must streamline, simplify taxes for MSMEs—LCCI president

Government must streamline, simplify taxes for MSMEs—LCCI president

Toki Mabogunje is the newly elected president of the Lagos Chamber of Commerce and Industry (LCCI). A lawyer by training, she is a business consultant with a special interest in the growth of micro, small and medium enterprises (MSMEs). In the last 36 years, she has been involved in commercial and business enterprises from both public and private sector perspectives. In this interview with ODINAKA ANUDU, our Start-Up Digest editor, she explains her vision for the LCCI and what should be done to spur the growth of MSMEs in the country.

 

Tell me about your agenda as the new president of the Lagos Chamber of Commerce and Industry (LCCI).

My belief is that when you are given the awesome responsibility of leading an institution that is 131 years old, you must be very mindful of the reasons why that the institution was established in the first place.  So, really, the LCCI has taken its responsibility as the voice of business very seriously. One of my major jobs is to continue in the area of advocacy. The LCCI is here to ensure that the business environment keeps on improving for the success of Nigerian businesses, and we will continue to do that. So, anything that happens in the political or policy space that affects the ability of businesses to thrive becomes our business. The other reason that we exist is to promote our members’ businesses. We will continue with those strategies that promote their businesses like the Lagos International Trade Fair that is over 30 years. We have the ICTEL, which is about four to five years now. We are beginning to look at other specialisations or other parts of the economy are growing at rapid rates, needing our foothold to be thrown forward. Also, in the space of promoting businesses in Lagos, we have the African Continental Free Trade Area (AfCFTA) agreement and we need to be looking at that. We need to look at areas where leveraging can be done by businesses here. We need to be looking at how prepared we are for it. We need to be looking at what we need to do, both on the government and the private sector sides, in order to ready us for this massive opportunity for a country like ours that already dominates the space. Also, the chamber exists to protect its members. So, many of those legislations that may be coming up or policies that may inadvertently be harmful are things we will look at and take up in our usual way of dialogue. And then, finally, we stand for business ethics and for development of business. So, there is a whole arm of the chamber that involves business development—consulting and training. In fact, training has become very popular here. We will have a lot more of that because we need to have companies that will grow into the Dangotes of this world across sectors. The chamber is actively promoting the non-oil growth. My own personal touch on that is that I believe so much in inclusiveness. How do we include the youths and more women in it? How do we leverage digital technology to improve what we are doing? Eight or nine years ago, I started a mentoring programme when I was chairman of BEST unit. That programme continues to grow. Today, the alumni have elected an executive. It is to try and carry it to the next level.

Read also: LCCI launches mentoring alumni association, graduates 2019 mentees

As a business consultant, what would be your answer if young people ask you to advise them on what they can do to earn a living?

Strangely enough, when it comes to young people, I am also concerned about their own personal development and their visions for themselves beyond the problems of today. So, when it is young people, I start with personal development. I will ask, what is your interest?  Some young people set up businesses because their friends are succeeding in them. Throughout my life as a consultant, I have seen that it does not work. But if a young person has a very strong interest or passion in a subject matter, they are more likely to overcome the challenges that are sure to come their way. For some of them, I have what I call ‘the Visioning Session’. My firm helps them to look 10 years ahead into the future. Then, we throw options in front of them, including the sectors that are showing the most opportunities for young people like them. Why I am focusing on their personal development is really to build their muscle, their capacity to survive, whatever the business climate might be.

What are your thoughts on multiplicity of taxes in Lagos?

There are two sides to the tax issue. There is the issue of the tax payer and the government that has to raise the internally generated revenue to be able to govern well. Underlining all of these is the activities of touts. Some of them are not even touts but legitimate workers in the local government who are exploiting the situation of these micro enterprises. As a consultant, I got involved in Enugu State several years ago when they were looking at the issue of multiplicity of taxes as it affected micro businesses. One of the things that was done, through the associations that the micro enterprises belonged to, was some education around tax. The director of tax at the state level was asked to draw up legitimate levies and taxes that these people were expected to pay at the state and the local government levels, so that if anybody came to ask of any tax that was not on that list, the people would report. What they were encouraged to do was to report it at a particular office. Once it was reported, the state government would take some internal action. The government engaged with those associations and assured them that some levies would not increase within a particular period. That is education on the side of the person paying. On the side of government, our view is that below a certain income bracket, they should simplify it to one payment. As far as you are small or micro enterprise and you are earning below a certain amount, this is the one payment you make as your own contribution to tax. Many countries in Asia, particularly South-East Asia, have tried it and it worked.  We keep hearing of streamlining of taxes, but especially in Lagos where we suffer from enthusiasm of public officers who want to raise internal revenue, businesses are now on the receiving end. As a chamber, we encourage our members to report these things to us, because when we do our advocacy, it is always evidence-based.

Do we still need to have radio and television taxes today?

Those taxes are what I call ‘relics of the colonial times.’ I really do not think so. I think technology has changed the equation.  Now that a lot of broadcasts are done with completely different kinds of technology, which minimises the cost across board, these are things that should be reviewed.

A lot of Nigerians believe that funding of MSMEs has improved because of the intervention of the Central Bank of Nigeria (CBN), which has raised loan-to-deposit ratio from 60 to 65 percent. As someone who interfaces with these business owners, have you seen the impact of that policy on them?

I started MSME consulting when there was nothing—around year 2000. So, I am looking at over a span of 20 years. In 20 years, the situation has greatly improved. There is a lot of funding, but still a lot of reluctance on the side of the banks because they consider MSMEs to be high-risk. This is what has led the CBN to use carrot and the sticks with the banks. Banking is still not where it should be. I believe that every bank account holder should be able to borrow from the bank to whatever degree that the business turnover justifies— which is not happening now. On the side of the banks, we do not have enough banks that understand MSME lending. You cannot be lending to Emmanuel & Sons the same way you are lending to Globacom. We do not have enough of them with technical competence behind MSME lending. Because of that, they are even more averse with risks that come with being an MSME. It is not as if the risks are extraordinary in Nigeria compared with any other developing country. Some of the things that the banks require in order to make good lending decision are not yet strengthened. The policy behind BVN is an absolutely brilliant idea that it helps to determine those who are bad borrowers and good borrowers, but we need to leverage it. On the side of the MSMEs, there is a whole education to be done in terms of MSMEs not understanding the banks’ requirements. So, they keep complaining that the banks’ requirements are steep. Yes, in some cases, they are, but in other cases, they are looking for basic information. Are you keeping your financial records? Do you have processes in place that convince the banks that over time you will pay back? There are challenges on both sides which need to be worked upon.

 How do we de-risk the MSMEs to enable them have access to funds and become efficient enterprises?

The MSME community has a huge ecosystem around it. Some people are setting up co-working systems to create environment where MSMEs can share resources and get infrastructure support so that it won’t be a burden on one person. Some are setting up innovation hubs, helping them to generate ideas. You have a lot of institutions that are doing a lot of things. The University of Lagos has set up the Enterprise Development Centre. We have the Enterprise Development Centre (EDC) of the Pan-Atlantic University. There are FATE Foundation and a lot of others. We have  business associations which have the capacity to do a lot of things. You have LCCI, the Manufacturers Association of Nigeria (MAN), the Nigeria Employers’ Consultative Association (NECA) and all others. All of them engage in the development of MSMEs. I think where there is hope for more impact is through organisations like Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). What we would require from SMEDAN is more consistent performance. Sometimes they function, at other times they are quiet. They have the capacity to affect a lot more MSMEs. We commend the effort of the government in setting up the Development Bank of Nigeria, but they are still new. They are still depending on the framework of commercial banks to lend money. We have new players in the market such as venture capitalists, angel investors and impact investors. The thing is to see a groundswell of growth.