Sunday, July 24, 2005

Transnational Corporation of Nigeria

Transnational Corporation of Nigeria Plc, became a reality with a strong display of support from the Nigerian federal government!

The company was formally launched last week with the Federal Government granting it immediate approval to build a $250 million (about N33.25 billion) refinery in Lagos. TransCorp facility is projected to refine up to 400,000 barrels of crude oil per day when fully functional. President Obasanjo, also announced other concessions which include a “license to build an independent power plant, designated land mass for the construction of free port facility, Continued support to help open up markets on the African continent and to make the corporation a partner in Nigeria's current policy on Private-Public Partnership, and access to government's cassava report for the construction of a cassava processing facility”. Nigeria’s backing for TransCorp is minored after China, South Korea and Japan- countries with successful mega companies that enjoyed significant government backing. TransCorp will be soon be listed on the Nigerian stock exchange, for about 6 naira per share.

Obasanjo (middle) and the Board of Directors:
Ndi Okereke-Onyuike (chairman), Festus Odimegwu, Aliko Dangote, Jim Ovia, Jacob Mayo Ajekigbe, Funso Lawal, Femi Otedola, Tony Elumelu, Tony Ezenna, Waziri Mohammed, Adegboyega Olulade and Nicholas Okoye. picture courtesy of

I had pondered on the wisdom of favoring big business over Small and Medium-sized Entreprises (SMEs) in an earlier post Mega business in Nigeria. The argument that big businesses will generate employment is economically flawed. Besides, the nations we are emulating have strong manufacturing base, we do not, yet ! So for the time being:

Is there any hope for SMEs in Nigeria?

The Small and Medium Industries and Equity Investment Scheme (SMIEIS) is a voluntary initiative of all licensed banks in Nigeria to set aside 10% of their Profit Before Tax for equity investment in, and promotion of SME. The SMIEIS is intended to stimulate economic growth and development, develop local technology and generate employment. But since its inception in 1999, this initiative is yet to have any significant impact on SMEs or the national economy. And Abuja doesn't seem to mind!

The SMEs are the work-horse of any developed nation, so why isn't that the case in Nigeria?

Debbie Ariyo an analyst with Africa Economic emphasized on some of the limiting factors facing SMEs in Nigeria, she mentioned:
" serious undercapitalization with difficulty in gaining access to bank credits and other financial markets; corruption and a lack of transparency (an ever present constant)... very high bureaucratic costs; but most damagingly, a seemingly lack of government interest in and support for the roles that SMEs play in national economic development and competitiveness.”
She further explained why SME’s are of great importance to our national economy:
“...A study done by the Federal Office of Statistics shows that 97% of all businesses in Nigeria employ less than 100 employees. (SMEs usually have between 10 and 300 employee and an asset base of up to N200m excluding land and working capital)..., it then means that 97% of all businesses in Nigeria are, to use the umbrella term, "small businesses". The SME sector provides, on average, 50% of Nigeria’s employment, and 50% of its industrial output.
Aside from the government being more proactive and offering a more enabling environment for SMEs. Debbie proffers some commonsensical solutions that caught my fancy:
"...positively encourage the spirit of enterprise among our young people,...universities and other institutions of higher learning must be encouraged to become more commercially focused and more entrepreneurial. They should be encouraged to develop more ties with local businesses and hold more business related activities on campus. Students should be encouraged to take business studies modules as part of their main courses. This will help develop the interest in business, and provide the basic understanding of what to expect when going into business. The knowledge gained will help provide students with a ready option when they graduate, rather than wasting their time looking for the jobs that are not available. This will ultimately help to reduce the pool of unemployed young people in the country..."