Nerus Ekezie, is the Director of Membership of the Nigerian Association of Small and Medium Enterprises, NASME. In this interview with AYO FADIMU, he speaks on challenges facing the economy, the latest MPC meeting and other sundry issues. Excerpts:
The meeting of the monetary policy committee is aimed principally to look at the monetary policy of the nation, review it regularly, look at the inflationary rate and then look at the interest rate, try to harmonize and come out with a statement that will impact on the economy positively. So the last meeting of the economic policy committee, they retained the monetary policy rate at 11percent, the CRR at 20 percent, meanwhile remember that the CRR is a cash reserve ratio, now the 11 percent of the monetary policy rate is aimed at motivating the banks to reduce interest rates. Remember it used to be 13 percent, and when it was 13 percent, the economy was not fully vibrating the way it should be. So the rate of funds became so high, so the reduction to 11 percent is to reduce the cost of fund in the market; and to encourage the bank to lend more especially to the small and medium enterprises. Now the effect of this change is yet to be felt, remember also the banking institution has also been going through a lot of challenges arising from the capital control, that’s the excess control, foreign market control and also some other domestic challenges. So the banking institution that is supposed to nurture the economy is finding it difficult to lend to the real sector, now the real sector you know is the productive sector of the economy and if in the productive sector there is no fund available for them to produce, definitely it will affect the cost of goods and services and it will also make their product uncompetitive. We are yet to see the effect of the reduction of MPR to 11 percent
For SMEs, what do you say to that 11 percent, is it a welcome development or it should go a little higher or a little lower?
For us in SME sector, we would have loved the rate to go down a little more because the implication of the rate coming down would mean the bank lending at a frenzy rate, because the MPR will come down further, the bank will also reduce interest there by making the cost of fund a little bit lower. Be that as it may, if this is what you have been told, that yes it has come down, as I said before, the SME sector is yet to feel the impact, perhaps the challenges the banks are having have not made them to start implementing the cut in MPR to the extent that it will have a positive effect on SMEs, but cost of funds is still hovering between 25 or 28 percent and we feel this rate is extremely high for the productive sectors to be able to produce, sell and make profit, amid environmental challenges the SMEs are also facing.
Ok, you have the dollar rate now at 305, some are saying it is a good omen for the SMEs, because most people would now be looking towards local raw materials, is it true?
It depends on the angle you look at it; remember processing of primary products is required for production take a process. Nigeria has abundant raw materials, minerals, but how many of these minerals have been processed to be able to stand alone and can be used for primary product for the manufacturing sector? If the manufacturing sector has to fall back on local raw materials, it also means that government also should have started long time ago to process the minerals up to a stage it can be used as raw materials, and in so doing, the government doesn’t need to go into three or five for the local productive firms to turn back to the local raw materials to produce, because as a businessman, you will always lend to source for raw materials at a reasonable rate to be able to make profit when you produce. Yes the real sector maybe looking inward to source for raw materials within, how many of those sectors that can process those raw materials, sometimes the cost of processing the raw materials to get it into a primary product for use by the manufacturing companies are huge. This is where government comes to assist in processing the materials to the stage of usage.
And how are you engaging the government?
On the direction they want to go in their various ministries, but the holistic policy direction of the present government, is still being awaited, the investors policy direction, the agricultural policy direction, the mineral process of policy direction, the educational policy direction and many others status. So we are yet to get the government holistic policy direction of the economy and to get that you find it difficult to engage the government because you have to gauge based on what the government has presented. Of course budget has been presented but it has not been passed. In other words, we are waiting and then we are praying that the government should work fast in order to give Nigerians the dividend of democracy.
Sir, at present a lot of people are saying that many jobs will be lost. Your members, SMEs many of them are into one or two, they don’t have many employees due to their resources, do you think that many of them might close shop, or there are some palliatives that you are also using to assist them?
Natural law periphrases, but in the midst of challenges, the tough will survive, the weak will die, the weight of SMEs differs from one another. There are SMEs that are well established, they are managing the challenges, we are hoping is a transition period and they have mapped out strategies to survive it. We also have the weak ones, especially those in the micro categories we are afraid, instead of transiting from micro category to the small category, they are stuck in their micro categories before this present economic challenges. We are afraid some may have started closing shops, some have started rationalizing for the shock of the present economic shock. Therefore, we are advocating that the government of Nigeria should be fast in rescuing the ailing economy in order to stem the high mortality rate.