STIMULATING ENTREPRENEURSHIP, PERSONAL FINANCIAL MANAGEMENT AND INVESTMENT

1. STIMULATING ENTREPRENEURSHIP, PERSONAL FINANCIAL MANAGEMENT AND INVESTMENT Paper Delivered by: John Niyi Olanrewaju , Ph.D Director-General, Michael Imoudu National Institute for Labour Studies (MINILS), Ilorin At the Workshop Titled “Global Trends and Emerging Issues in the Nigeria Oil and Gas Industry: Critical Challenges and Prospects from all Stakeholders’ Perspectives” organised by PENGASSAN, Port Harcourt Zone Held in Uyo, Akwa – Ibom State, 8th – 10th May, 2013

2. INTRODUCTION Let me start this presentation by appreciating the organizers of this programme for inviting me to contribute to the important discourse on entrepreneurship, financial management and investment opportunities. This is a theme that is very relevant within the context of institutional reforms, change management and organisational growth, and progressive organisations ought to apply themselves to it. You may also be aware that a major subset of strategies advocated by multilateral agencies as remedy for the recent global financial crisishas largely mapped around these isues. Indeed, a major prescription of the International Labour organization (ILO) in terms of resolving related problems of the economic crisis, especially poverty and unemployment, is the promotion of entrepreneurial development and sound finanial management practice among member nations. Entrepreneurship and innovation are increasingly being acknowledged as important drivers of economic growth, productivity enhancement and employment generation as well as key aspects of development. This is because entrepreneurs’ activities contribute significantly to stimulating a country’s economic growth in addition to ensuring sustainable development.

3. Entrepreneurial engagement also constitutes an important means of an individual’s economic survival and an instrument for income security. It is therefore imperative for individuals who are on the verge of transiting from paid employment into self-employment to develop their capacity in this regard. Indeed, the objective of entrepreneurship training at the point of disengagement from paid employment is to facilitate the creation of an entrepreneurial culture, which in turn, will help potential retirees to identify and pursue business opportunities. The goal is to encourage retirees to become entrepreneurs by starting their own businesses and acquire the technical knowledge to grow such business startups. In discussing this paper therefore attention shall be focused on the meaning and scope of these concepts, as well as their application for personal, organizational and economic growth in addition to the general conditions for their effectiveness. Knowledge of basic economic and labour market fundamentals is usually crucial to success with respect to entrepreneurship development, financial management and investment opportunities, we shall also therefore be highlighting relevant features of the Nigerian economy that should serve as basis for investment decision by an intending entrepreneur.

4. Entrepreneurship Development: Meaning and Scope The word, entrepreneurship is derived from the French word "entreprendre" meaning to “do something” or “undertake”. “Entre” is to “enter” while “prendre” means to “to take”. Consequently, an entrepreneur is described as someone who undertakes or creates a business venture, starts a new project or tries a new investment opportunity.

5. Entrepreneurship is therefore the ability to seek investment opportunities and establish an enterprise based on identified opportunities. • Generally, entrepreneur takes risks, to produce and market a product or service by using resources in a new way or create something of value from practically nothing. • To an economist, an entrepreneur is one who brings resources, labour, materials, and other assets into combinations that make their value greater than before, and also one who introduces changes, innovations and a new order. • To a psychologist, such a person is typically driven by certain forces – the need to obtain or attain something, to experiment, to accomplish or perhaps escape the authority of others.

6. In almost all the definitions of entrepreneurship above, the following features are common: • (1) Initiative taking, • (2) Organising and reorganising of social and economic mechanisms to turn resources and situations to practical account, • (3) The acceptance of risk or failure.

7. Attributes of an Entrepreneur Bolton and Thompson (2000) list the following as major attributes of successful entrepreneurs: 1. Entrepreneurs are individuals who make a significant difference – Entrepreneurs make things happen by transforming hazy ideas into reality. They refuse to accept the status quo and believe that they can change the situation of things. 2. Entrepreneurs are Creative and Innovative – Creativity and innovation are the universal marks of the entrepreneur. Creativity is the thinking process involved in producing an idea or a concept that is new, original, useful and satisfying to its creator or to someone else. On the other hand innovation is the process of applying a new and creative idea to a product, service or method of operations to achieved desired result. 3. Entrepreneurs spot and exploit opportunities – Entrepreneurs have "eagle eyes" for spotting opportunities. They discoverwhat others see as nothing or as usual as opportunities. They are able to synthesize the available information and clarify patterns that other doesn’t notice.

8. 4. Entrepreneurs find the resources required in exploiting opportunities – Entrepreneurs consciously employ resources in a disciplined way to exploit identified opportunities both within the internal and external environment. 5. Entrepreneurs are good net workers – As good net- workers, entrepreneurs know where to find resources, who to get connected to and how to control a business. 6. Entrepreneurs are determined in the face of adversity – Entrepreneurs have high need for and ability to weather the storms of the business world. The average entrepreneur is an over comer who can resolve problems under pressure. 7. Entrepreneurs manage risk – Entrepreneurs take the risk of nurturing a business with little or no chance of surviving. However, it should be emphasized that entrepreneurs should take calculated and not careless risks.

9. 8. Entrepreneurs have control of the business – Entrepreneurs are usually in control of their business. They develop key indicators to alert them of danger and try to act accordingly. 9. Entrepreneurs put customers first – Consciously or unconsciously, entrepreneurs put the customer first. They try as much as possible to make the customer the centre of their business. They are best sales people. 10. Entrepreneurs create capital – Creativity and innovation, resources acquisition, control of the Business, networking and other action factors help in the creation of financial and social capital by the entrepreneur.

10. Skills for a Successful Entrepreneur Skill is described as the capability to respond, in a practiced way, to the varying conditions and challenges posed by situations, jobs and context occasioned by the environment to accomplish a goal or purpose. Entrepreneurial skills required in running a profitable and successful venture includes: • Personal skills – these are skills that are attributed to an individual personality such as behaviour or habits: • Vision – ability to see opportunities for improvement in areas of business • Drive and persistence – to be self-motivated and energetic

11. Initiative – ability to instinctively start a project • Commitment – ability to see projects through to completion • Control – being in charge and making decisions • Risk tolerance – ability to make decisions when facts are uncertain • Resilience – being able to recover from failure • Self determination – using personal initiative to determine success

12. Interpersonal Skills – this refers to ability to relate and communicate effectively with others, work with people, communicate with and satisfy employees, customers, suppliers, shareholders, investors and more. These include: • Communication skills – competence with written and oral communication • Listening – being a good listener • Teamwork – ability to work with others, delegate and empower others to get things done

13. Leadership and Motivation – encourage and inspire others to follow you and your vision? • Conflict resolution – ability to resolve conflicts • Personal relations – basic positive human traits like empathy, sociability, cooperation, consideration and tactfulness? • Negotiation – ability to collaborate with others to reach a win-win solution to differences in position • Ethics – dealing with people based on respect, integrity, fairness and the truth

14. 3. Critical and Creative Thinking Skills –These are skills to organize and administer a successful venture especially the ability to find the necessary information to support wise decisions about a venture. 4. Opportunity identification – ability to recognise trends and generate plans for practical and doable ventures. 5. Practical Skills – practical skills and knowledge that is needed to produce goods or services effectively, and run a business venture profitably. 6. Goal setting – ability to set goals and develop a plan to implement them. 7. Planning and organising – co-ordinate people to achieve set goals efficiently and effectively. 8. Decision making – being able to make decision based on relevant information and weighing the potential consequences 9. Business knowledge – having general knowledge in the main functional areas of a business (marketing, finance, operations) 10. Opportunity-specific knowledge – being able to understand the market you what needs to be done to bring a new product or service to market

15. Financial Management An entrepreneur must possess the ability to manage finance in such a way as to live a quality life and to successfully manage the enterprise that he/she oversee. Financial management can be described as the financial decisions an individual is required to make in order to ensure continuous and sustainable running of an enterprise to meet the needs of both the internal and external environment under which it operates.

16. Personal financial management requires: • Even allocation of personal income in such a way that debts are not incurred as well as ensure that personal and family needs are met. • The discipline required is that income must be properly managed such that expenses do not rise above income! • Cultivating the habit of budgeting – it is important to know how much you earn, how much you spend, how to budget and how to do budget control

17. Learning to save – you must learn how to save no matter how small your income is and the saving must be consistent and safeguarded • Learning to invest – in both real and financial assets i.e. in stocks, real estate and properties. You must learn to invest wisely on profitable ventures • Avoidance of credit purchases except when it is necessary and for profitable ventures that could yield returns • Learning how to turn around your income to generate wealth for you and returns on any chosen area of investment

18. The key elements that enhance personal financial management include: • Financial planning – ensure that income is spent to meet prioritised needs, and plough into investment • Financial control – to meet objectives and priorities set out • Financial decision-making – right decision to invest and diversify into other area of business activities

19. Entrepreneurship and Investment Opportunities within the Nigerian Economy Investment is about the proactive use of money to grow or appreciate long term financial goals through such ventures as; buying of securities or other monetary assets in the financial or in fairly liquid real assets, such as real estate, properties, stock etc. Investing also implies using money to make more money or putting money into gainful use through productive activities.

20. Nigerian government has instituted various enterprise support networks and structures to promote the development of small-scale Enterprise (SME). Such measures include: • Granting of fiscal incentives (i.e. tax holidays and tariff concessions) such as tax holiday for the first six years of SME operation. • Monetary support such as the Central Bank of Nigeria credit guidelines requiring commercial and merchant banks to allocate a portion of the available funds for loan to small enterprises and the recent directive to keep interest rate to SMEs within a single digit unit.

21. A number of other developmental financial institutions and schemes have also been established to promote the development of the small and medium enterprises (SMEs) such as: - Nigerian Industrial Development Bank (NIDB), - Bank of Industry. - Micro-finance banks - Small and medium scale Development Agency (SMEDAN) - National Directorate of Employment (NDE) - National Poverty Eradication Programme(NAPEP) - Nigeria Import Export Fund (NEXIM) and - the National Economic Reconstruction Fund (NERFUND)

22. Within the Nigerian economy, the following business opportunities can be explored and tapped: • Agriculture/agro allied activities – Poultry farming, fishery (catfish), grass cutter and snail rearing, food stuff, restaurant, fast food vending etc. • Solid mineral:- Quarrying, germ stone cutting/polishing and crushing engineering • Power and Transportation – Power generation, Haulage and logistics business (cargo and passenger), car lease; car hire services or outsourced bus service • Hospitality and tourism business – Hotels, accommodation, resort centres • Oil and gas business – Construction and maintenance of pipelines, drilling, refining/bye-products, filling stations, product distributions etc

23. Environmental and waste management business – Refuse collection/disposal, recycling and drainage/sewage construction • Financial and banking services – Banking, insurance, brokerage and stock trading • Engineering and fabrication work – Machines and tools fabrication • Building and construction – Plan and design services, material sourcing, estate development, general contractors, interior decoration • Textiles Sector – Importation of wears, sewing of specialized uniforms • Information and Communication Technology/telecom business: – Cyber café, manufacturing and repairs of GSM accessories • Education – Schools, Training centre or Tutorial centre, Consultancy services

24. Sources of business finance for Entrepreneurs There are two main sources of finance, namely; internal sources and external sources. The Internal source is funds or business capital raised through personal savings or financial support, while the external source is through borrowing or credit facility. Short term sources of finance: • Bank overdraft • Cooperative loan • Leasing • Micro Finance Bank loans • Contributions (Esusu)

25. Long term sources of finance: • Bank loans • Share capital • Debentures • Asset sales • Venture capital • Retained profit • Owners' capital • Government or local authority grants.

26. Problems of Entrepreneurship Development in Nigeria In spite of various government attempts at encouraging entrepreneurship development in Nigeria, the following factors still constitute challenges to entrepreneurship growth and development: 1. Lack of trust and confidence in made in Nigerian goods and products – this has resulted in the rejection of "made in Nigeria" goods as inferior to the imported ones. The mentality that anything made in Nigeria is inferior has discouraged and forced many local entrepreneurs to go out of business. 2. The dire shortage and inadequacy of infrastructure facilities – this to my mind is the greatest problem facing the Nigerian entrepreneur. It is no longer news that 51 years after independence, the supply of electricity is epileptic if not non-existent, the roads are death-traps leading to loss of lives and properties. All these made cost of production very expensive and not competitive.

27. 3. Corruption – since entrepreneur have to deal with government officials from the Local Government to State Government and the Federal Government. The demand for gratification in forms of bribes, double taxation, etc has brought frustration to many entrepreneurs. 4. Lack of management know-how- resulting in inability to apply appropriate managerial concepts and principles in running the affairs of the business. This is usually manifested in poor financial control, weak marketing effort, failure to develop a strategic plan, uncontrolled growth, improper inventory control. 5. Inability to make entrepreneurial transition – as the business grows from the craft to entrepreneurial stage, informal and unprofessional management will suffice. However, the advent of the professional stage(s) calls for the business to be managed on professional basis. This will see authority delegated, policies formulated and a formal structure of relationship established.

28. 6. Unguided and unrestricted importation of goods into the country – the advent of globalization with its attendant liberalization and deregulation has forced the Nigerian government to remove restrictions on the importation of goods even when there is a local substitute or competing brand. The unguided implementation of globalization has strangled most businesses. This is because, these businesses use obsolete methods of production, and private sources of power and in the end, their product are either inferior or not as competitive as the imported ones. 7. Financial constraints – financial institutions requirement to obtain facilities are in most cases an impossibility for small scale entrepreneurs. 8. Poor knowledge based economy and low spirit of competition and poor enterprising culture 9. Non-inclusion of entrepreneurship programme in the school curricula 10. Poor societal attitude to Technical and Vocational Education development 11. Insensitivity of government to enterprise creation and expansion strategy and poor plan and execution of processes of action

29. Recommendations to enhance Entrepreneurial Development, Financial Management and Investment I will recommend that you apply yourself to the following in order to make progress in the area of entrepreneurial development and personal growth. 1. Have plan for personal growth and development. Do not leave this to chance; or say ‘I will cross the bridge when I get there’; document (write out) the plan, strategize around it and pursue it responsibly. 2. Have a basic knowledge of the economic and social environments. 3. Seek information on dominant influences; keep abreast of trends and developments within your environment. 4. Have a universal or broad view. In other words think global and act local. Do not limit your potentials.

30. 5. Seek information on labour market requirements and develop self along these requirements. 6. Be conscious of technological developments or changes and ensure you keep pace with same. 7. Have an investment reflex. Save some money, no matter how little you get. Do not only consume but save and invest. 8. Ensure you update your skills and competences. Emphasize being multi-skilled. 9. Do not be fixated about securing specific jobs especially white collar Job or ready-made employment. 10. Think seriously about self employment or starting your own small business. There is a lot of merit in starting a small business. Lay your hands on something and don’t despise humble beginning.

31. 11. Identify those things you have a passion for and consider the possibility of transforming them into investment or business opportunities. 12. Discipline is central to most things. Having a disciplined lifestyle is key. 13. Time management is crucial, it is at the center of planning. There must be proper ordering of time to accommodate the different personal growth and development activities. 14. Find good role models – rely on Godly Counsel. 15. Vocation is a major part of personal development. Planning in this area must be done along with efforts in other areas 16. Maintain a broad network of relationship. Many times network of relationships has a way of affecting personal growth and development outcomes.

32. Conclusion Entrepreneurship development is a global reawakening that every nation wants to key into as a means of reducing unemployment and poverty level, promote wealth creation and empowerment to enhance economic growth and development. However, government and all other stakeholders must provide an enabling environment in the form of efficient and adequate infrastructural facilities as well as stable fiscal and financial policies that would support accelerated development of enterprises and personal growth.

33. Finally, let me say that we can seize the opportunities for entrepreneurship development and personal growth in spite of daunting challenges. It requires the ability to recognize those opportunities and determination to work diligently for their realization. The key word here isPreparation. These things have to do with more than chance; conscious and strategic effort is required. It is my prayer that we all succeed in life. Thank you!