MAKING KADUNA GREAT AGAIN
How solving the issues related to the 3 Ms (Management, Markets and Money) can revive business growth and restore the city's fortune
The history of durbars in Kaduna tells the tale of the socio-economic fortune of the town. It was home to the great durbars. Kaduna owes its place on the map to British imperial administrator Lord Fredrick Lugard. In 1917 he chose to make it the political and military capital of the colonial Northern Nigeria region. The colonial government set up a rail transport hub that precipitated its commercial boom. And in 1956, the capital hosted a royal durbar to welcome the young British Queen Elizabeth II. Kaduna was blossoming into an industrial hub by the 1960s. Leventis Stores and Bata Shoe Company opened shop. Arewa Textiles began production in 1963, PAN in 1972, and the Kaduna oil refinery in 1980. It became home to many expatriates. And to mark the Pan-African showpiece, FESTAC, in 1977, we hosted another memorable durbar
The decades that followed FESTAC witnessed the end of the great durbars and the commercial decline of the city. In the aftermath of the late 1970's global oil crises and an indigenisation policy that drove away foreign technical and direct investment, Nigeria fell into an economic slump. Fiscal and social discipline deteriorated. Ethno-religious unrest occurring intermittently from 1992 to date, led to segregation along ethno-religious lines and accelerated the exodus of professionals and investments. Industrial density in Kaduna declined in these decades as textile, food processing, assembly, and manufacturing industries began cutting production.
Industrialization is the path to economic development. Modern industries appeared in the 19th c. Western Europe and North America and transformed their societies into world powers. More recently, economies from China to Brazil successfully embraced industrialisation to bring the majority of their population out of extreme poverty. There is consensus among economists that industrialisation is a prerequisite for bringing out large numbers of people from poverty.
Even within the past periods of high economic growth, due to lack of industrialisation, unemployment, and poverty in Nigeria remained very high. For instance, it ranked 152 out of 188 countries on the global Human Development Index 2016. Recently we were labeled the poverty capital of the world, with over 50% of Nigeria's 190 million people living on less than one US dollar per day.
National industrialisation policy has continued to fall short in realising the potential of our biggest employers and creators of wealth - small and medium industries.
Figures show that there are about 37 million micro-enterprises (employing 4 or fewer persons.) in Nigeria – and under 64,000 small-scale enterprises (5 or more persons.)
Employment growth is achievable when businesses grow. Micro-scale businesses become small-scale enterprises. Small-scale enterprises become medium-scale businesses. In all successful industrial economies, small-scale and medium enterprises, not micro-enterprises, are the mainstay of the economy. Their capacity enables them to provide valuable inputs along industrial value chains. In countries like Nigeria, their low number compels large industries to depend on imports. Constraining industrial expansion and putting the economy under pressure.
Small business growth has been hindered by the following:
Entrepreneurs cannot build the structure and processes of a modern organisation.
Businesses lack technical competency to carry on modern production. The culture among typical budding entrepreneurs and employees does not foster skill development.
Lenders consider micro and small businesses high risk and won't fund them. Over the years, banks preferred to incur penalties than loan out CBN funds to small businesses. Venture capitalists also complain that they don’t find enough investment-ready companies.
The 3 Ms Solution
Here is my opinion, for any business growth intervention to succeed it must address gaps in these three areas:
Management - Corporate governance
Markets - Access to markets
Money -Investment readiness
Corporate Governance
Business transformation to align corporate governance and operations with ESG standards (environmental, social, and corporate governance) in businesses. Entrepreneurs need to achieve a level of organizational capacity to meet the requirements of partnership and funding from corporates and public sector agencies.
Access to markets
A contract bidding support to enable micro-scale enterprises to win corporate, public sector, and international procurement. Micro-scale enterprises have limited business and market intelligence for decision making. We need to remedy this, build capability, acquire the datasets, and make it globally accessible.
Investment Readiness
Micro-scale enterprises will need to position themselves to attract social impact (patient) capital from impact investors. We need to provide technical support directly to entrepreneurs and investors to facilitate this.
Why impact investors? The onset of COVID-related recession will dry up commercial funding sources. Impact investors, including development agencies, are expected to continue to funding companies that can solve large problems for large populations and still make a profit.
It is also paramount to build a local investor community. Wealthy individuals with interest in impact can be trained and certified to become local angel investors or set up venture funds.
Target for intervention
We need to prioritise which business categories get support.
We should identify key existing/emerging large-scale industries and support existing micro-and small businesses that serve as supply and distribution channels. If we succeed, we will nurture industrial belts in the state.
Consumer brand businesses matter. Consumer goods production has a high social impact on the local economy and communities. It employs both high and low skills workforce, has a significant value chain, and conserves financial resources by substituting for imports.
We want to support sustainable businesses with social and environmental impact. The purpose is to position Kaduna state to thrive in a world facing an uncertain future, social, and climate crises. Social enterprises are also most likely to raise funding and get support for growth in a weak economy.
A successful intervention will not be government-led. It will require an entrepreneurial initiative, bringing all stakeholders together to implement this business growth strategy.
Imagine a peer-group business network using collective bargaining to access to markets and peer-review to drive corporate governance and investment readiness.
Businesses bench-marking each other, getting hands-on through coaching programs, and sharing business intelligence. Many are being left behind by Nigeria's worsening economic conditions. Entrepreneurs building sustainable and high growth businesses can create well paying jobs and solve social problems.