In order to promote trade and increase MSMEs’ access to capital in Nigeria, the International Finance Corporation (IFC) and Bank of Industry (BoI) have cooperated.
Managing Director/CEO of Bank of Industry, Olukayode Pitan, stated the following at a workshop on trade and supply chain finance in Lagos: “We are delighted to partner with the IFC on this laudable initiative towards ensuring that Nigerian businesses are not only able to boost their domestic production capabilities, but also able to partake actively in regional and global value chains for improved trade and economic growth.”
Nigerian MSMEs make up roughly 86 percent of the labor force and 50 percent of the nominal Gross Domestic Product (GDP), although they receive a lot less private sector funding than is typical in sub-Saharan Africa.
At the occasion, two new IFC papers were released, offering recent information and analysis on the subject. According to IFC’s Market Bite Nigeria: Innovation Offers Key to the Broader MSME Finance Market report, which was based on a survey of nearly 1,000 MSMEs throughout Nigeria, there is an unmet demand for credit by Nigerian MSMEs of about N13 trillion, or $32.2 billion.
Regulatory restrictions and infrastructure deficiencies are some of the causes cited for this gap, since many financial institutions view MSMEs as being too expensive and hazardous to serve.
The paper suggests that to enhance credit assessment capabilities and better serve smaller firms, the financial sector should make use of cutting-edge technologies and creative business models.
The latest Supply Chain Finance Market Assessment Nigeria report from IFC estimates that MSMEs account for N1.4 trillion ($3.5 billion), or more than half of Nigeria’s supply chain finance opportunity.
The paper suggests that in order to better serve the supply chain financing market in Nigeria, MSMEs should be made aware of it. Financial institutions should also expand their capability, as should front office workers, regulatory improvements, and more use of digital platforms.
According to IFC research, increasing the availability and affordability of trade and supply chain finance could increase trade volumes by 8% to 16%, promoting economic growth and diversification in Nigeria and other important regional markets.
“Strengthening supply chains and trade flows through additional finance could set the stage for faster growth, economic diversification, and poverty reduction in Nigeria and the region. We are glad to present these new reports with data and insights to encourage further investment to close the MSME finance gap,” said Kalim M. Shah, IFC’s Senior Country Manager for Nigeria, Liberia and Sierra Leone.