Document Type

Occasional Paper

Publication Title

The Slow pace of Disbursement of the Small and Medium Industries Equity Investment Scheme (SMIEIS) Fund and the Need for Remedial Measures

Abstract

The objectives of this paper are to investigate the reasons for the slow pace of investment under the scheme and proffer measures that would address the identified problems. The paper is organized into seven sections to achieve these objectives. Following this introduction, an overview of SMIEIS is done in section 2, while section 3 contains the operations of the Scheme to date. The empirical investigation is discussed in section 4 and the constraints on the implementation of SMIEIS are highlighted in section 5. This is followed by the suggested remedial actions in section 6 and the paper is concluded in section 7.

First Page

1

Last Page

25

Publication Date

10-2003

Comments

This paper investigates the slow pace of disbursement of the Small and Medium Industries Equity Investment Scheme (SMIEIS) fund in Nigeria and proposes measures to address the identified problems.

Key findings:

  • Slow disbursement: Only 23.8% of the N20.6 billion set aside by banks under SMIEIS had been invested as of September 2003.
  • Lack of awareness: Many potential beneficiaries, especially outside Lagos and Abuja, are unaware of the scheme.
  • Banks' reluctance: Banks are more comfortable with short-term trade financing than long-term industrial financing.
  • Desire for control: Banks' desire for controlling interest in funded enterprises discourages entrepreneurs.
  • Bureaucracy: Company registration delays, high pre-investment costs, and cumbersome SMIEIS guidelines create hurdles.
  • Poor infrastructure: Epileptic electricity, water supply, and poor roads increase costs and reduce returns.
  • Weak SMIEIS administration: The SMIEIS office lacks manpower, expertise, and autonomy.

Suggested remedial actions:

  • Increase awareness: Conduct continuous enlightenment programs for both banks and industrialists.
  • Credit guarantee scheme: Share risk with banks to incentivize investment.
  • Withdraw overdue funds: Compel banks to invest their SMIEIS funds and reduce pressure on the foreign exchange market.
  • Public disclosure: Publish names of participating and non-participating banks.
  • Establish a dedicated unit: Create a well-staffed and autonomous unit within the CBN to administer the scheme.
  • Review SMIEIS guidelines: Streamline procedures, address concerns, and encourage real sector investment.
  • Training: Improve the skills of SMIEIS staff in industrial organization, project appraisal, and monitoring.
  • Reduce VCC bureaucracy: Streamline operations and increase efficiency.
  • Address forex issue: Lower premiums on foreign exchange transactions to improve attractiveness of real sector investments.

Overall, the paper argues that SMIEIS has the potential to be a valuable tool for promoting economic growth, but that its implementation needs significant improvement. By addressing the identified constraints and implementing the proposed remedial actions, SMIEIS can be made more effective in achieving its objectives.

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