Nigeria should provide credit guarantees to banks to help local SMEs access capital – Ecobank chief

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The reason Nigerian Micro, Small and Medium Enterprises MSMEs find it easier to get capital abroad rather than within the country is because Nigeria is poor compared to developed countries, the Group Chief Executive Officer of Ecobank Transnational Incorporated, Ade Ayeyemi has said.

He said this in response to a question raised in the course of a plenary session on Access to Capital at the Nigerian Economic Summit, NES. The question was asked by an entrepreneur, Nasir Yammama, the founder of Verdant AgriTech Limited, Wednesday.

“We are poor, lets just get that. As a county, we cannot develop and become a big country on handouts. We have to create the local conditions for wealth creation that allows our savings to be transmitted into investment.

“Therefore at the initial stage, we need to be an attractive destination for foreign money to come in because due to most of the infrastructures that have been built in those places, the people are living longer and therefore are saving.

Investment opportunities in those countries are no longer as attractive as ours.

“So, there is investment money that can come here because the bridges here have not been built, roads have not been constructed. So there is money that can flow to this part of the country but we have to compete with the rest of the world,” he said.

Regarding how to handle the SMEs in a situation like this, Mr. Ayeyemi suggested the government provide credit guarantees to banks.

He also highlighted the contribution of the capital market to Nigeria’s Gross Domestic Production, GDP, as one the reasons for the problematic access to capital for MSMEs

According to the CEO,“If you look at our country today, our capital market is very small. As a percentage of GDP, it’s not up to 10 per cent. The capital market, market cap, even in South Africa is three times, even in Kenya, it is multiplied and there as a percentage of GDP.”

Mr. Yammama suggested that banks should invest in educating entrepreneurs on how to come up with appropriate business plans and structures.

The Managing Director of the National Development Bank, NDB, Tony Opanachi, promised to address issues hindering the growth of MSMEs in Nigeria especially in the area of funding.

“If you want to run a sustainable business, you can’t run away from the micro environment that you have. And DBN is set to run a sustainable business. We are trying to avoid the mistakes of the past, where you come out with intervention funds they dry up, but there’s no sustainability. One of the key things DBN is doing differently to run a sustainable business over time.

“If you look at that segment, the micro for example, how are they being served in terms of debt equity? Most of the microfinance institutions basically focus on micro and learn the act of lending to micro businesses. They’ve perfected the interaction, they know the business to lend to them but they have major issue with funding.

“They have capacity issues in terms of funding so while they have those customers, a lot of the people come in trying to get money through them but they don’t have the capacity.

“So DBN for example is coming to provide that capacity for them to ensure that they are able to lend to more,” Mr. Opanachi said.

Other suggestions made in the course of the plenary to enable SMEs gain access to finance were for SMEs to consult with experts, formalize their businesses, make their ideas more attractive, make their mode of operation more skilful and engage in technical partnerships and also for the government to provide more investment opportunities.

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