Nigeria: Small enterprise and job creation

The recently announced plan of the new Ministry of Trade and Investment to create over 3 million jobs in three years can be seen as part of the Federal Government’s plan to frontally attack the problem of unemployment in the country.

It would be recalled that the Federal Government set up the National Economic Management Team (NEMT) to tackle the tetra-headed problem of unemployment in the country. The committee was inaugurated by Olusegun Aganga, the then minister of finance, who was the chairman of the NEMT, with the very important task of helping to develop an action plan on job creation.

In tune with this government’s policy direction, departments, agencies and parastatals under the new Ministry of Trade and Investment have pledged to create additional 3,100,850 jobs within the next three years. This revelation was one of the highpoints of the communiqué issued at the end of a three-day retreat of the ministry in Abuja. The retreat was chaired by the minister of Trade and Investment, Olusegun Aganga, and the minister of state for Trade and Investment, Sam Ortom.

Backward integration
A breakdown of the job creation figures shows that the Bank of Industry will create 1 million jobs, the Department of Trade (2 million jobs) and others (100,085 jobs). As part of the strategies towards achieving this, the departments and parastatals will develop a comprehensive backward integration programme aimed at improving innovation and productivity for rice, sugar, wheat, yam, potatoes, starch and palm produce, among others. The backward integration programme will no doubt involve outsourcing cultivation of these farm products to smallholder farmers.

Nucleus estate initiative
The nucleus estate initiative pioneered by the National Economic Summit Commission’s (NESG) Agriculture and Food Security Commission becomes handy here. This initiative is one which contemplates a scenario where the large farms/firms will serve as coordinating centres for a concentric of several small farmers who double as the production chain in the industry. The big farms/nucleus estates are under obligation to buy off the produce, thereby providing guaranteed market for the small farmers.

According to the communiqué, the ministry will establish model industrial clusters in each geo-political zone across the country. To achieve effective export promotion, participants agreed on the need for increased efforts towards streamlining the nation’s export produce and documentation as a way of facilitating trade through stronger collaboration with all relevant trade facilitation.

This means our myriad of exporters who are small business players will benefit from this.

IFC investment
Job creation is not government’s exclusive preserve. The private sector is playing a vital role too. International Finance Corporation (IFC), a member of the World Bank Group, is investing $20 million (N3 billion) in Food Concepts plc to help the Nigerian quick-service restaurant and bakery operator improve its social, safety and corporate governance standards, and expand operations in Ghana and Nigeria.

From a report by Financial Nigeria, IFC will provide a financing package consisting of a $13 million (N1.9 billion) equity investment and a $7 million (N1.05 billion) loan to the company, which will  be used for long-term funding to help develop about 40 new quick-service restaurants, double bakery production, and establish a poultry production farm in Nigeria. Food Concepts’ expansion plan is expected to create hundreds of jobs, benefitting a number of smaller businesses in its supply chain.

Deji Akinyanju, founder/CEO, Food Concepts, said “IFC’s long-term capital and loan will allow Food Concepts implement its long-term growth strategy. IFC’s global expertise will also enable us to become a leading regional quick service restaurant and bakery operator, using best practices in corporate governance, insurance, financial management, and environmental and social matters.”

Solomon Adegbie-Quaynor, IFC country manager for Nigeria, said “IFC’s investment in Food Concepts underscores our commitment to supporting Nigeria’s private sector, especially its SME sector. Our partnership with Food Concepts will also help develop reliable food supply chains and strengthen the competitiveness of West Africa’s agribusiness and food-processing sectors, which are vital to the region’s development.”

Key priorities for IFC
Supporting small and medium enterprises and agribusiness are key priorities for IFC in Africa, since these sectors account for the bulk of employment on the continent. Across Africa, IFC is supporting projects across the food supply chain, including processing, logistics, and distribution.

The IFC has been involved in several small enterprise finance projects in Nigeria. It would be recalled that  in 2008, responding to the government’s  request for assistance in sparking greater bottom-up economic growth, the World Bank approved a $32 million (N4.8 billion) credit to Nigeria for micro, small, and medium enterprise development.

The project was the first to be approved under a joint pilot programme for African micro/SME development between the World Bank Group’s concessionary lending unit, the International Development Association (IDA), and its private sector arm, the IFC.

Although Africa’s largest oil producer, Nigeria remains one of the world’s poorest countries, with a manufacturing sector predominantly made up of small businesses whose low productivity and other constraints hinder job creation. Strengthening the non-oil private sector is thus a major priority, both for the government and for the World Bank Group’s development assistance strategy for the country.

To meet this goal, the project was planned to focus on the introduction of models designed to strengthen local institutions that help entrepreneurs build viable companies. These efforts will then be complemented by support for targeted reforms in the regulatory and legal environment that affect micro and small businesses. The project will also help selected public sector institutions create effective public-private partnerships for small business development.