Remarks at the Nigeria-USA Small and Medium Enterprises Financing Conference
Assistant Secretary, Bureau of Economic and Business Affairs
Thank you for that introduction, Sheriff, and for organizing this important conference. We appreciate the work your chamber does in Kaduna and throughout the northern region, and we value your close partnership with our embassy.
I am proud and delighted to join Vice President Yemi Osinbajo, the distinguished governors, and NACC President Balogun, in speaking with you today.
We consider Nigeria to be one of our most valued partners, and my government and the American private sector strongly support your efforts to foster growth and prosperity. We do this as equal partners, whether through USAID’s economic and development programs, our trade capacity development or the robust and socially responsible commercial relationships that we continue to build.
So I am delighted to have the opportunity to address the investors, entrepreneurs, and honored members of the government here today. You are the core component of that partnership between our countries.
As you know, I am the Assistant Secretary of State for Economic and Business Affairs and one of my top priorities is to support entrepreneurs everywhere who not only create livelihoods for themselves and their communities but help lift whole economies.
As a former chairman and CEO in the American entertainment industry for 20 years, I bring a businessman’s perspective to the job.
I also come from a culture that believes it’s important to have regulations and business standards, but which also believes that governments should allow businesses to do what they do best within the established rules and regulations: compete in the marketplace with as much opportunity and as little interference as possible.
If you walk through downtown Abuja or Lagos, at any time of day, you will see young people wearing soccer shirts with famous players’ names on them like Cristiano Ronaldo of Real Madrid.
Like millions of soccer fans around the world, they love to watch the Ronaldo’s of the world display their talents in competition with others. And they know that these superstars can only create their magic when the referees keep their whistles in their pockets and let the game flow freely.
Businesses and their investors need the same thing: a level playing field without too many constraints, red tape, and regulation.
They want access to contracts and other opportunities in an atmosphere of free, fair, open, and transparent competition.
When they can operate in those environments, they become more productive and innovative. They produce better products and services. And they generate economic growth and jobs.
When you consider the enormous presence that small and medium-sized enterprises – or SMEs – have in economies almost everywhere in the world, the case for supporting and empowering them becomes even stronger.
In the United States, SMEs make up 99 percent of all firms. They employ more than 50 percent of private sector employees.
They generate 65 percent of new private sector jobs. Across sub-Saharan Africa, SMEs account for up to 90 percent of all businesses.
They contribute more than 80 percent of the output and the jobs in most African countries.
That’s the message I bring today: what’s good for SMEs is good for any economy. And in the case of Nigeria, the case couldn’t be more timely or important: Timely because oil prices are lower than they have been in recent years. Nigeria’s economic growth has dropped off. And it’s no secret that Nigeria is consistently rated as one of the most difficult places to do business.
Important because Nigeria is the biggest economy in Africa, and two thirds of its population – about 125 million people – are younger than 25. And they are looking for the kind of bright and positive futures than anyone would demand and deserve.
These are transformative times and they need transformative measures. But it can be done, as long as Nigeria’s economy continues to evolve from oil dependency and towards a more diversified model; as long as it creates the kind of environment that encourages its own businesses; as long as it fosters business conduct that does not engender corruption; and as long as it supports greater and easier access to finance for SMEs.
The Nigerian government already recognizes the importance of a diversified economy, and is working to reduce its dependence on oil revenues by supporting its agriculture, services, and manufacturing sectors.
That’s an important first step, and we look forward to that momentum increasing – and continuing.
We look forward, as well, to policies that reduce tariffs and encourage businesses instead of restricting them.
When businesses see prohibitively high interest rates, they’re going to lose their incentive to borrow, invest and expand. The same is true when they encounter red tape at every turn.
Those efforts will be further strengthened when President Buhari follows through on his commitment to root out insecurity and corruption in this great nation.
We stand by to offer our full and robust support, including through safeguards such as the Foreign Corrupt Practices Act. This U.S. law helps ensure responsible business conduct abroad and respect for U.S. laws and local laws prohibiting bribery.
We also fully support Nigeria’s transition from an economy that, up until recently, has depended on natural resources, to one that is knowledge-based, and which protects Nigerian creativity, from books to Nollywood movies, from software products to designer clothes.
When Nigeria sends a signal that it values and safeguards intellectual property, more foreign investors will have the confidence to become partners in new ventures, to invest in Nigeria’s future, and to bring jobs to both sides of the Atlantic.
In fact, this afternoon, I’m meeting with Nigerian government agencies that work on intellectual property to discuss ways we can work together on this important issue.
As we know, an economy can’t function without infrastructure or energy.
Businesses need reliable roads and transportation links so that, for example, a farmer in Jos can get her product to markets in Lagos before it spoils. And they need dependable access to electricity so they can operate.
Through President Obama’s Power Africa program, which is aimed at doubling electricity access in sub-Saharan Africa, we are working with the government to increase that access.
The main topic of today, however, is financing, which is one of the most fundamental ways we can help businesses become successful.
SMEs need affordable, accessible financing. But they are not finding what they need. This is not just true in Nigeria but across Africa, where the cost of finance, including investment finance, is higher than any other part of the world.
The numbers tell the story. Almost 50 percent of African companies identify lack of access to finance as a major constraint to doing business. And in Nigeria, only 10 percent of Nigerian SMEs have a loan or line of credit.
Those numbers are a cry for help that is ringing across the continent and across Nigeria – and no government can afford to ignore it.
If governments create the right business environments, where financing is easy and accessible, those businesses will grow and create jobs and opportunity.
If they don’t, those businesses are more likely to give up. When that happens, it’s not only those businesses that lose. It’s their economy, and their country too.
Today, you’ll be hearing many different ways that we can help finance businesses.
I want to briefly outline some of the things the U.S. government is doing in this space, through the Overseas Private Investment Corporation – better known as OPIC – and through USAID.
OPIC offers working capital loans and lines of credit to support small and medium enterprises. It reaches out to companies in developmental sectors such as sanitation and health care.
Because we believe that responsible investing is integral to sustainable growth, it also ensures that investors do not violate the Foreign Corrupt Practices Act or anti-corruption laws of other countries.
It is widely known, and study after study has confirmed, that women are among the most productive and under-used economic assets in the developing world.
That’s why – as President Obama announced in Kenya last July – OPIC is contributing $100 million to support Goldman Sachs’ 10,000 Women initiative, making more capital available to women-owned enterprises around the world.
OPIC has also worked to advance microfinance – with more than $700 million spread across 50 developing nations.
If we look in the other direction, we see that investors are also looking for opportunities to fund promising companies in the developing world.
So OPIC has created an “aligned capital” program to help these investors find information about firms and entrepreneurs that seek financing, particularly equity.
USAID is also supporting SMEs in a number of ways.
It works with private enterprises to stimulate exports through training and capacity building in areas such as access to finance, export competitiveness, and linkage to international markets and partners.
Through its Development Credit Authority, or DCA, it helps entrepreneurs, who don’t have collateral, secure the bank loans they need to start their businesses.
I want to close with a quotation from former U.S. President Bill Clinton – a firm friend of Africa. He famously said: “There’s nothing wrong about America that cannot be cured by what is right with America.”
I believe the same is true for Nigeria. So much is right about this county, from its can-do spirit to its abundant resources. It has the largest economy in Africa, and some of the most entrepreneurial people in the world. They are fearless and always enterprising.
Imagine what could happen, if Nigerian SMEs had easier access to finance.
Picture that 10 percent of businesses with loans that I mentioned earlier climbing higher – higher than the 21 percent of SMEs who have loans and lines of credit in South Africa, or the 24 percent in Kenya, or even the 36 percent we see next door in Ghana.
They could become the economic Ronaldo’s of Africa.
I am told that, right now, Nigerian businesses are predominantly concerned with creating businesses and selling within Nigeria’s borders, with some business regionally. But there’s no reason to stop there.
Since the African Growth and Opportunity Act – better known as AGOA – was signed into law 15 years ago, channels of trade between Africa and the United States have opened like never before.
Non-oil exports have tripled – and by that, I am referring to the cotton and textile industries. This expansion of trade has translated into 350,000 direct jobs and hundreds of thousands of indirect jobs.
Now that the U.S. Congress has renewed AGOA, those channels remain open for another decade. That’s a strong signal for American investors to invest with confidence in Africa.
This will help bring prosperity to a continent with the fastest growing population in the world. By 2050, Africans will comprise more than a quarter of the world’s labor force – larger than those from China or India.
As I said, transformative times call for transformative responses. With the stakes so high and the potential so great, there is really no choice but to move forward and succeed.
As long as Nigeria’s SMEs are given the freedom and the means to open their sails, they will be able to harness these winds of change, and carry this great country ever forward. Thank you.