By David Alade
Nigeria has over 35 million unemployed or underemployed labour force. That number may not ring a bell until you know that it represents over 40% of the labour force. Addressing this is both the responsibility of the government and that of private sectors; it is too big to leave to the hand of just a part of the economy.
Policies have been made to help reduce this alarming number by the federal government. One is supporting entrepreneurship.
Recently, we read that the CBN has concluded on a scheme to grant loans to NYSC members repayable over 7 years, this is after it had run a scheme of loan for the same group of individuals’ payable over a maximum of 3 years from 2016.
These efforts are commendable and may be helpful. We do not have data regarding the effect of this initiative over the last 3 years, hence, we cannot reliably assert the effectiveness of the scheme on any metric (loan repayment, business survival, employment of at least 3 individuals, etc.). However, we can infer from the rising unemployment statistics that the overall goal of the scheme is probably failing; the unemployment rate has been on the rise ever since.
These then require that we ask questions about policy effectiveness and whether we are getting it right regarding policy alignment with popular needs. Are the youth interested in the entrepreneurship that the government is encouraging or do they just see the loan scheme as an avenue to eat from the ‘national cake’? Are they entrepreneurial or they just see the avenue as a way to not stay home doing nothing? Would they have chosen the entrepreneurial part if they had a job instead? These questions really need to be answered, and the answer is supposed to drive policy statements.
As opined earlier, public data regarding the effectiveness of the CBN loan scheme is not available to the public hence, we cannot conclusively say a thing about policy effectiveness.
This article is anchored on a simple hypothesis: the youths in question are not largely interested in entrepreneurship as we are made to believe, they want a job, a well-paying one. In fact, fulfil this condition and the majority of those treading the entrepreneurial part will quickly fade out of sight.
If this is the case, how can we reduce unemployment and speed up growth in our country Nigeria? I propose the establishment of two types of funds:
- Investment fund
- Innovation fund
Investment Fund – huge capital for the savvy entrepreneurs
Following from the hypothesis that job is what the majority wants not entrepreneurship, the investment fund proposed here will be a fund set out for large-scale investment in a labour intensive business line. Sangu Delle of Golden Palm Investments Corporation practised this in his investment fund in Botswana. Instead of the fund being distributed to small scale ventures, it was aggregated and invested in one promising venture capable of creating a value chain that will employ what the sum of the small funds would be capable of. The result proved great. According to him, Sangu,
“Consider these two alternative scenarios. One: You loan 200 dollars to each of 500 banana farmers allowing them to dry their surplus bananas and fetch 15 per cent more revenue at the local market. Or two: You give 100,000 dollars to one savvy entrepreneur and help her set up a factory that yields 40 per cent additional income to all 500 banana farmers and creates 50 additional jobs. We invested in the second scenario and backed 26-year-old Kenyan entrepreneur Eric Muthomi to set up an agro-processing factory called Stawi to produce gluten-free banana-based flour and baby food. Stawi is leveraging economies of scale and using modern manufacturing processes to create value for not only its owners but its workers, who have an ownership in the business. Our dream is to take an Eric Muthomi and try to help him become a Mo Ibrahim, which requires skill, financing, local and global partnerships, and extraordinary perseverance.”
We need this thought process in Nigeria; we need the likes of Dangote, to employ more.
The investment fund is to create large-scale companies capable of employing more labour and whose success will be more than the sum of what individual small funds could have achieved.
Innovation fund – resilient fund for the real entrepreneurs
The investment fund will separate the folks who primarily want employment from those who can be regarded as the real entrepreneurs. Innovation fund will be the anchor of experimentation, iteration and possible success of the entrepreneurial venture.
The innovation fund will have characteristics different from the investment fund, below are characteristics that I will consider imperative:
- The fund should have a life span similar to the current NYSC fund of 7 years
- Allowance should be given to a right off if the entrepreneur can reasonably account for the business failure that ate up all the fund
- The fund should be resilient enough to allow for ‘entrepreneurship failure’
- The fund should have an advisory board, the board will weigh ideas and allocate fund like venture capital (Series A, B, C…)
- The fund should have a part that allows for R & D spending either to the entrepreneur or another independent venture outfit.
- The fund should be opened to ‘all’ as long as the advisory board has certified the idea.
Nation building is a strategic and long-term effort, my propositions here are to help in bringing strategic context to different funds being set aside by various government level in the drive to encourage entrepreneurship. I hope someone finds this relatable and relay the message to another and another who will help our government to think objectively on this.