Alleged $35m Diversion: Buhari’s Minister Writes AljazirahNigeria

Alleged $35m Diversion: Buhari’s Minister Writes AljazirahNigeria
  • Gives detailed account of fund, beneficiaries involved
  • Copy of letter attached

By Chidozie Ogbonnaya

Following an allegation of the diversion of $35million meant for the Growth and Employment Project, GEM, the Minister of Trade and Investment, Mr.

Okechukwu Enelamah has debunked any wrongdoing in the handling of the funds meant for GEM.
Mr. Enelamah who wrote in response to the inquest launched by AljazirahNigeria sequel to the indication of plans to convert funds supposedly meant to support over 4000 Small and Medium Scale Entrepreneurs to Small and Medium Enterprise where only 25 companies will benefit from the fund. The Ministry was also accused of flouting the guidelines of the project which requires that the project coordinator should be a director or an assistant director. However, rather than adhere to the rules, a former personal staff of the minister was brought in to administer the funds.
It is noteworthy that the $35 million in contention was hitherto approved by the Senate in 2013 to end in 2018 but was recently extended to run till March 2019. AljazirahNigeria also recalls that the fund was loan support from the World Bank and the United Kingdom Development for International Development, DFID.
Mr. Enelamah made the clarifications in a letter written to AljazirahNigeria on March 18, 2019, titled: Re: Request for Clarification on Alleged Diversion of GEM Project Money.                                                                                                Mr. Enelamah who responded through his Communication Adviser, Bisi Daniels had these explanations to make:
“As one of the GEM’s intervention windows, the Equity Window was designed to empower SMEs through investments by private Financial Institutions, PFIs. Though the model was well intended, the workability did not meet the full expectation of the project given the peculiar nature of the industry. To that end, the Equity window was restructured into an SME Fund to allow direct capital insertion into the businesses rather than through advisers and managers.
“Bearing in mind that the various intervention windows under GEM was largely structured as grants and given the fact that the GEM project is structured as a loan from the world bank to the FGN, the expected impacts on growth and employment in participating firms were fundamental to the reasoning behind the fund.       
“While a major part of the entire $160m loan was designed to be disbursed in the form of grants to qualifying SMEs through various windows within the project, the Honorable Minister of Industry, Trade, and Investment in collaboration with other stakeholders ‘thought it wise to create a buffer from the funds’ thereby reducing the consequential repayment liability to the FGN.
“To achieve the above, the sum of $30m was to be set aside as seed capital to setup a commercially viable entity with the potential of reaching out to more SMEs that might not have the requirements to access commercial loans from traditional banking institutions or enough collateral to cover loans from other development institutions like BOI.
“By implication, the SME fund would have been used to generate returns on investment that will in turn help reduce the repayment obligation of the FGN to the World Bank.
“The SME fund was intended to catalyse future growth potential of SMEs that will by extension increase the employment creation thereby reducing the unemployment indices and bring about economic growth in the country.”
Enelamah also emphasised that the rationale behind the establishment of the SME fund was to bring about sustainability and capacity to impact much more than the 4,000 SMEs as stated given the revolving nature of the fund. On the allegation of violation of the guidelines of the project through the engagement of private sector project coordinator, the Minister gave the following explanations:
“Contrary to the allegation of flouting the rules by appointing a private sector coordinator instead of a director within the civil service, the project implementation document made provision for the use of a private sector consultant should the needed capacity for the position be lacking within the civil service.
“The engagement of a private sector project coordinator who happened to have worked with me many years ago was carried out after a rigorous and transparent recruitment process in line with the World Bank procurement guidelines for the recruitment of individual consultants.
“The GME Project Implementation Unit, PIU, which comprised civil servants of the Ministry undertook the exercise sequel to a no objection granted by the World Bank. It is pertinent to note that the World Bank and other stakeholders agreed that it is beneficial to have a combination of the private and public sector to make the project delivery on its promise. The wisdom of the decision has played out with the success so far recorded,” he said.
The Minister, however, pledged to remain focused in a bid to see the successful completion of the project come March 29, 2019.  He reeled out verifiable facts regarding the achievements of the project so far:   “Over 1,000 MSMEs have benefited so far from GEM grant across the different grant windows, AVDD, Accelerator, Fast Track, Innovation, Equity and Insourcing and Outsourcing.
“27 local consulting firms, Business Development Service Providers, have been trained to deliver technical services to MSMEs across the country.
“774 MSMEs benefited from the consultancy services provided by the Business Development Services Providers, BDSPs . Over 21,000 MSMEs have received technical assistance including training offered by EDC/Lagos Business School.
“GEM supported projects including the You-Win, Youth Entrepreneurs Grant Scheme, Project ACT, Film Industry Support Project, Nigerian Entrepreneur Development Programme, NEDEP.”
The Ministry also said that the Project under its care has so far catalysed the creation of over 26,000 jobs in its five intervention sectors and still counting. Enelamah is, however, the second serving Minister in President Muhammadu Buhari’s administration to be hit with allegations of this magnitude. AljazirahNigeria recalls that Abdulrahman Dambazau’s Federal Ministry of Interior was indicted of aiding and abetting criminal diversion of public funds and extortion of foreigners resident in Nigeria through consultants employed by the Ministry.
The scandal which was brought to the public knowledge in a petition written to the Federal Ministry of Finance by renowned human rights lawyer, Femi Falana in January 2019, saw the Ministry deny any wrongdoing.

Below is Copy of the letter

March 18, 2019

 Mr. Morgan Omodu
The Editor, Editorial Page
Aljazirah Newspaper

Dear Sir,

Re: Request for clarification on Alleged Diversion of GEM Project Money

We refer to your letter to the Honorable Minister dated March 4, 2019 with respect to the above subject.
Thanks for your quest for balanced information. It will interest you to know that the GEM Project has undergone various stages of implementation challenges because of its resolve to ensure accountability, objectivity and probity in the entire process.
Consequently, there has been some allegations in some sections of the media, most of which are unfounded and unsustainable. Nevertheless, in response your letter, please find below our position:

Alleged diversion of $35M through the establishment of an SME Fund
As one of the GEM’s intervention windows, the Equity Window was designed to empower SMEs through investments by Private Financial Institutions (PFIs). Though the model was well intended, the workability did not meet the full expectation of the Project given the peculiar nature of the industry. To that end, the Equity Window was restructured into an SME Fund to allow direct capital insertion into businesses rather than through advisers and managers.
 Bearing in mind that the various intervention windows under GEM were largely structured as Grants and given the fact that the GEM Project is structured as a loan from the World Bank to the FGN, the expected impacts on growth and employment in participating Firms were fundamental to the reasoning behind the Fund.
While a major part of the entire $160m loan were designed to be disbursed in the form of grants to qualifying SMEs through various windows within the Project, the Honorable Minister of Industry, Trade and Investment in collaboration with other stakeholders thought it wise to create a buffer from the funds thereby reducing the consequential repayment liability to the FGN.
To achieve the above, the sum of $30m was to be set aside as seed capital to setup a commercially viable entity with the potential of reaching out to more SMEs that might not have the requirements to access commercial loans from the traditional banking institutions or enough collateral to cover loans from other development institutions like BOI.
By implication, the SME fund would have been used to generate returns on investment that will in turn help reduce the repayment obligation of the FGN to the World Bank.
 The SME Fund was intended to catalyze future growth potential of SMEs that will by extension increase the employment creation thereby reducing the unemployment indices and bring about economic growth in the Country.
In summary, the thinking behind the establishment of the SME Fund was to bring about sustainability and capacity to impact much more than the 4,000 SMEs as stated given the revolving nature of the fund.

Engagement of a private sector Project Coordinator
Contrary to the allegation of flouting the Rules by appointing a private sector coordinator instead of a Director within the Civil service, the Project implementation document made provision for the use of a private sector consultant should the needed capacity for the position be lacking within the  civil service.
The engagement of a private sector Project Coordinator who happened to have worked with me many years ago was carried out after a rigorous and transparent recruitment process in line with the World Bank Procurement guidelines for the recruitment of Individual Consultants. The GEM Project Implementation Unit (PIU) which comprised Civil Servants of the Ministry undertook the exercise sequel to a No Objection granted by the World Bank.
 It is pertinent to note that the World Bank and other stakeholders agreed that it is beneficial to have a combination of private and public sector to make the project deliver on its promise. The wisdom of the decision has played out with the success so far recorded.
While we remain focused to see to the successful completion of the Project come March 29, 2019, see below verifiable facts regarding the achievements of the Project so far:
Over 1,000 MSMEs have benefited so far from GEM grant across the different grant windows (AVDD, Accelerator, Fast Track, Innovation, Equity, and Insourcing and Outsourcing)
27 local consulting firms (Business Development Service Providers ) have been trained to deliver technical services to MSMEs across the country;
774 MSMEs benefited from the consultancy services provided by the BDSPs  (Business Development Services Providers);

·         Over 21,000 MSMEs have received technical Assistance including training offered by EDC/Lagos Business School;
The Project supported the Entertainment Industry by funding two (2) on-line music distribution companies with a view to reduce piracy and improving the income of content developers in the Music Industry;
The Project also assisted two innovations hubs aimed at supporting start-ups and accelerators through the emerging e-business technology across the country. It is expected that these hubs will continue to provide their services in perpetuity. However, within the project period 195 SMEs will benefit from these services. 
400 artisans were trained in Video and Sound editing under support to the Entertainment Industry;
To address the skill deficiency in Construction industry, 600 youths were trained to promote quality of service and affordable housing development in Nigeria;
In collaboration with other stakeholders, GEM led the development of the first Nigeria Leather Policy. The Policy has been validated by stakeholders and approved by the Federal Executive Council;
The Project supported a robust Nigeria Housing Census in order to create a data base that will provide a reliable housing information to Investors, Policy makers, and end-users; in addition, GEM solely sponsored the production of National Housing Standards that has been validated and adopted by various stakeholders in the construction value chain in Nigeria;
As part of the Cluster Unit activities of the Project, market analysis were conducted to identify market failures that have impeded the growth of SMEs across the 5 GEM intervention Sectors (ICT, Entertainment, Hospitality And Tourism, Construction And Light Manufacturing Including Agro & Allied Processing).   
GEM supported projects including the YouWin youth entrepreneurs grant scheme, Project ACT (a film industry support project), Nigerian Entrepreneur Development Programme (NEDEP); 
Project has so far catalysed the creation over 26,000 jobs in its five intervention sectors and still counting.
Thank you once again for your quest for a balanced reporting.

BISI DANIELS
COMMUNICATIONS ADVISER TO MINISTER OF INDUSTRY, TRADE AND INDUSTRY


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