The International Finance Corporation (IFC) and the Bank of Industry (BoI) have partnered to strengthen trade and boost access to finance for micro, small and medium-sized enterprises (MSMEs) in Nigeria.
The Managing Director/Chief Executive Officer Bank of Industry, Olukayode Pitan, revealed this during a trade and supply chain finance workshop in Lagos.
He said, “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 account for about 86 percent of employment and contribute 50 percent of nominal Gross Domestic Product (GDP), but receive significantly less finance from the private sector than is the average in sub-Saharan Africa.
Two new IFC reports were launched at the event, providing fresh data and insights on the topic. Based on a survey of about 1,000 MSMEs across Nigeria, IFC’s Market Bite Nigeria: Innovation Offers Key to the Broader MSME Finance Market study identified an unmet demand for credit by Nigerian MSMEs of approximately N13 trillion, equivalent to $32.2 billion.
Some of the reasons attributed for this gap include regulatory constraints and gaps in financial infrastructure, as many financial institutions also perceive MSMEs as too costly and too risky to serve.
The report recommendded that the financial industry leverages new technology and innovative business models to improve credit assessment capacity and better serve smaller businesses.
According to IFC’s new Supply Chain Finance Market Assessment Nigeria report, MSMEs generate more than half of the Nigerian supply chain finance opportunity, accounting for N1.4 trillion ($3.5 billion).
The report proposes that the supply chain finance market in Nigeria can be better met by raising awareness among MSMEs about supply chain finance, capacity-building among financial institutions, front office staff, regulatory enhancements, and increased use of digital platforms.
IFC research shows that improving the availability and cost of trade and supply chain finance could boost trade volumes by 8 percent to 16 percent, supporting economic growth and diversification in Nigeria and other key markets in the region.
“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.