Policy Analysis, Policy Formulation and Policy Execution isn’t ROCKET TIME.
There are GOVERNMENT Policies that comes with IMMEDIATE OUTCOMES.
There are GOVERNMENT POLICIES that comes with OUTCOMES in the MEDIUM RUN (6 Months to 2 years, they become VISIBLE) and then
There are POLICIES that take time to MANIFEST even when the immediate short run shows some DISADVANTAGE or PAINS.
It is DISINGENIOUS to lack understanding of what category a POLICY EXECUTION falls under but then go ahead to INSULT or deride the POLICY because you want to SOUND WOKE.
I will use a CASE STUDY to buttress my POINT above.
In recent months, I have been providing deal structuring and financial advisory consultancy services for some MSME’s in the Agribusiness sector, these are MSME’s with revenues that reaches or exceeds 1 million dollars per annum.
Let’s talk about the OUTRIGHT ban Government placed on the importation of RICE in 2015.
Before the BAN, no Private Equity Firm or Financial Banking Institution ever dared LOOK at the RICE farming and processing sub-sector – NO ONE DARED invest his or her hard-earned money into these sector because of the obvious losses you would make as an Investor seeing that importing rice was way cheaper and it offered a faster route to making money. For a country that up to 2015 spent 6 Trillion Naira (22 Billion Dollars) per annum importing rice into Nigeria, that was massive revenue Nigeria was losing to these IMPORTERS.
To encourage private sector-led participation, the Government had to place an OUTRIGHT ban and enforce its restrictions (even if some ass***s still import illegally, it has reduced to at least more than 80%). Now you must understand that Government can never ever LEAD capitalism no matter how hard they try, the private sector driven by its lust for money and profits will always be better suited and positioned to exploit favourable Government POLCIES to its advantage which in turn creates JOBS and massive opportunities alongside the VALUE CHAIN.
Of course, with every painful POLICY, this was going to be HARD and PAINFUL because no private sector finance institution was going to RELEASE money unless Government made good its COMMITMENT to outrightly BAN rice importation and make such a COMMITMENT publicly via open and sustained enforcement.
It is painful because the cost of rice sky-rocketed and Nigerians had to pay more to enjoy the staple food they have known all their lives but it is normal with demand and supply – many atimes, pressure of high demand will automatically shoot prices up but over time once more private sector led institutions comes in, there will a lot more rice in the market and market forces will automatically set in to bring down the cost of a bag of rice and of course we expect the quality to improve.
Now Government has done its PART, it is time for the PRIVATE SECTOR to step in but I want to highlight a few points and lessons I have picked so far dealing with a lot of MSME’s that generate revenues that exceed or reaches A MILLION DOLLARS and above.
a. The same issues that bedevil one-man businesses or small-time business owners are the same ones that bedevil MSMS’s also. Many MSME’s don’t have proper financial governance processes that guides their accounting, finance and audit function.
b. Many MSME’s don’t keep proper records of their sales to enable audit firms carry out efficient and effective checks of their records to enable them ascertain if they are truly profitable.
c. Many MSME’s are not financially liquid and to financiers, if you don’t have enough liquid cash in your business, that’s a dangerous sign to show you are not particularly vested in the business. What I mean here is having enough cash at bank that is untouched, more like savings.
d. Many MSME’s in Nigeria are largely cash-backed businesses that collect a lot or the bulk of their revenue via cash payments – this encourages leakages and loopholes.
e. Many MSME’s don’t have a well-structured procurement and supply chain process instituted to guide against theft and ensure a standard set of measure
f. Most MSME’s in Nigeria don’t even have an Internal POLICY to always fact-check or audit their expenses before payments are made and even payments are made, there is no sign or proof that it was internally cross-checked or backed up with proof such as invoice or receipts, this makes it hard to track expenses and easy for leakages to constantly happen.
g. We know that a lot of stealing goes on within MSME’s by staff but it can be drastically reduced or largely blocked if the right processes are instituted.
h. Many MSME’s avoid using their Bank accounts to avoid paying taxes – it is only ignorance and shortsightedness that will make anyone shortchange themselves in that manner – every entrepreneur’s goal is to grow and expand so suck it up and do what’s right by paying taxes. More money will pursue when you truly reflect the worth of your revenue in your books.
Now these factors have SOLUTIONS and you can talk to me via the email for a solution. These factors shared above is why we have a lot of seemingly BIG BUSINESSES unable to access FINANCIAL FACILITIES to scale their venture. No funder will back you with the issues above and these are the bulk of issues many MSME’s have in Nigeria. The major reason we still don’t have many players in the rice sub-sector is because of the ISSUES I have highlighted above. Until these issues are resolved and it takes a little while dependent on the depth of your HOLE – No funder will release their funds when they carry out their DUE DILIGENCE and see these LOOPHOLES.
So we can see that the RICE POLICY of the FEDERAL Government won’t take EFFECT IMMEDIATELY, this is a LONG TERM thing. The lessons I have shared above are also mistakes and errors I had made but had to learn very fast to correct when I started off running a small business.
Are there extra thoughts you have? Kindly share them.
Kindly share your thoughts to ngacpolicypositions@gmail.com
Elda David is a Public Policy Practitioner who works and resides in Lagos, Nigeria. EldaDavid is the President-in-Council and Research Lead for the Nigerian Global Affairs Council – A Technology-based and Digital Media-driven Public Policy and Evidence-based Research Think-Tank that simplifies Government Policy Positions at all times.