Legacy is what the LSETF represents for Lagos’s economy

Angered by the curfew initiated on the 20th of October 2020, non-state agents piggybacked off the ongoing #EndSARS protests to wreak havoc across Lagos state. While the aftermath of the unsanctioned violence they meted out was directed at police stations and government agencies, privately owned businesses were also targeted by opportunists looking to make their anger felt, with properties damaged and goods worth hundreds of millions of naira looted. This is the second time in two years that violence and theft of this nature has occurred in response to social unrest, and this time the Lagos state government under the leadership of Governor Babajide Sanwo-olu responded swiftly, returning order to the state after two days and rolling out a plan to support affected businesses. 

As part of Governor Sanwo-olu’s commitment to strengthening its already viable economy through entrepreneurship and advancing the projects laid out by previous administrations, the Lagos State Entrepreneurship Trust Fund (LSETF) launched an SME Recovery Fund, separate from its already established loan and empowerment programmes. While the fund already works extensively with the private sector in Lagos, it opened the recovery fund to all legal residents of the state with businesses affected by the carnage, extending economic and structural support for the rebuilding that lies ahead. 

Established in 2016, LSETF works primarily to reduce employment. Wary of previous employment schemes inaugurated by decree, often as a fulfilment of campaign promises, the Lagos state government was able to convince the Lagos state assembly to enshrine the Fund through the Lagos State Employment Trust Fund Law, freeing it of any political affiliations and making it independent of any government influence. An initial N25 billion capital infusion from the state government has financed the fund for the first four years, but subsequently donors and private partnerships will ensure the fund remains independent of external influence through successive governments. 

The LSETF seeks to alleviate three specific problems;  unemployability of Lagos’s young adult population through training schemes, maintaining the state’s position as the epicentre of the country’s technology revolution through innovation programmes targeted at startups and scalability challenges for MSME’s with its extensive loan programme. The SME Recovery Plan is an extension of its loan programme. 

Understandably, many small and medium scale businesses were hesitant to engage the government in this period of uncertainty. But the fund’s track record allayed any fears small business owners might have had about engaging the Recovery Plan. A 5% interest rate on its loans is the lowest in the state, and is offset by the incentives granted to beneficiaries of the loan scheme. An estimated 10,400 recipients have benefitted from the Fund’s loan scheme since it was written into law in 2016, a significant number of which were affected by the current spate of looting and have already received secondary assistance from the state government. With a total of 3,551 unique applications received within the 10 days the Recovery plan was open to the public (equalling about 30% of the total loan applications the LSETF has received since it established), which many suggest is only a fraction of the businesses actually crippled by the looting, we can surmise that trust in the government has improved greatly. 

The Recovery Plan once it is implemented will offer more than just financial support. It will also provide a road map for businesses to return to profitability through mentorships and partnerships with relevant collaborators to the fund. That kind of support is invaluable, especially considering many small and medium scale businesses were already struggling under the economic strain of COVID-19 and the unique challenges it presented for an economy that heavily relied on importation to thrive. It is also the kind of support businesses in the state will need as the world prepares for a second global recession in as many years. 

The recovery fund and the recent rash of lootings also presents an important challenge to the state government; how it must proceed to ensure that the progress made by the LSETF in enabling SME’s to thrive in the vibrant lagos economy is not derailed (again) by violence and looting. The state has a moderately well protected Central Business District, but operational costs have prevented the bulk of the state’s entrepreneurs from enjoying the operational and geographical benefits being situated in the CBD would traditionally provide. It must also address the proliferation of businesses in residential areas, a phenomenon that drew looters into areas into areas they would have otherwise ignored and increased the risk of violence against innocent citizens. 

The LSETF and the law that incorporated it is open to amendment and the potential for the fund to not only improve operational processes for SME’s and Technology startups, but to also offer structural solutions that lower the barrier to entry to businesses in the state, as well as improving ease of service. The information that the recovery plan will provide, as well as the opportunity to work closely with SME’s that previously have held negative views about the government’s motives towards business and trade will provide a road map to making these very important milestones achievable. It will also be interesting to map the impact of the Recovery plan over the next two years, as a blueprint for how state governments across the country can offer useful interventions to the cottage industries that shore up their economies.