Financing SMEs in Nigeria

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Obinna Chima highlights the benefits of financing small and medium-scale enterprises to the economy

Small and Medium Scale Enterprises (SMEs) contribute to improved living standards, bring about substantial local capital formation and achieve high level of productivity and capability. They have also been identified as a vehicle for employment generation and providing opportunities for entrepreneurial sourcing, training, development and empowerment. Developing nations such as Nigeria characterised as low income earners by the World Bank, value SMEs for several reasons.

Nonetheless, Africa over the past decade has become the world’s most exciting economic frontier and offering hope to a new generation of accomplished and engaged youth. By 2035 the number of Africans joining the working age population will exceed that of the rest of the world combined, according to the International Monetary Fund (IMF).

But José Filomeno of the World Economic Forum identified the boom in small and medium-sized enterprises (SMEs) as the success story of the continent.
Today, these small and growing businesses create around 80 per cent of the region’s employment, establishing a new middle class and fuelling demand for new goods and services, Filomeno pointed out.

Even the IMF’s Regional Economic Outlook for Sub-Saharan Africa had predicted that: “Over the next 20 years … sub-Saharan Africa will become the main source of new entrants in to the global labour force.” This is an emerging Africa that is absolutely determined to succeed. As a follow up to their bold commitment to infrastructure investment, African governments have now turned to entrepreneurs to support future growth.

However, in Nigeria, because of some challenges in the economy, a lot of SME operators in the country find it very difficult to effectively play their role. Some of these constraints have been identified to include competition, infrastructure, taxes, accounting, management, marketing, economic, planning and finance. In Nigeria, poor economic conditions, which also implies poor finance and inadequate infrastructure, have been identified as the most crucial factors.

No doubt, access to finance at relatively cheap cost, is also one of the most crucial problems hindering SMEs to have significant contribution to national output in Nigeria.
Despite these challenges, financial institutions such as Skye Bank Plc have continued to support SMEs to flourish.

The Chief Executive Officer, Skye Bank, Mr. Timothy Oguntayo, explained that the bank has continued to organise various forms of training for SME operators as part of its contributions to the development of the entrepreneurs in the country

Oguntayo described SMEs as an important sector as it provides more opportunities and employment than the mining, oil and gas sectors. Indeed, the sector can increase economic opportunities for those who have not been able to participate directly in large-scale projects.

“Without doubt, the SMEs sector has the capacity to drive and encourage indigenous business and rural economic development such that the whole country can be transformed to create productive economic activity for the people through which they earn their living and contribute to national development,” he said.

According to him, with over 32 million Nigerians involved in the sector, if properly developed, SMEs have the capacity to solve the unemployment problem in the country.
SMEs constitute an important vehicle for national development as they have the capacity to integrate a large segment of the populace in productive economic activities.

SME Footprints
Some of the bank’s footprints in terms of support for SMEs over the years include funding for Marine Platform, Main One, Beloxxi Confectionery, Sweet Sensation, Tantalizer, Serve Air.
In terms of the funding of the sub marine cable project, Skye Bank Plc and two other financial institutions had sealed a loan agreement with Main One Limited for the financing of the sub marine cable system which was expected to lead to improved internet access and telecommunication services in the country. The bank was the lead bank/fund arranger while two other financial institutions provided part funding for the project. During the signing of the agreement, the bank had restated its commitment to financing big ticket transactions in the critical sectors of the economy, saying the project had provided yet another opportunity for the bank to showcase its commitment to the nation’s economic development.

It had also said it would continue to leverage its project financing skills as well as lead the effort to transform the economic fortune of the country.
The Chairman of Main One, Mr. Fola Adeola had commended Skye Bank and other banks involved in the project for making it possible to actualize the vision of the company’s promoters and for positively identifying with the Nigerian project.

Also, following support he received from Skye Bank for supporting the expansion and growth of Beloxxi Industries Limited, the President/Chief Executive Officer of Beloxxi, one of the largest biscuit making companies in the continent, Mr. Obi Ezeude had commended the bank. Skye Bank had granted the biscuit maker credit lines amounting to N1.7 billion. The Beloxxi boss had said the facilities from the bank which covered both the cost of construction of the factory, and working capital had helped the company to stand on its feet at that crucial and difficult part of its existence.

In the same vein, as part of its effort to boost local content in the nation’s oil and gas industry, Skye Bank last year increased the capability of one of Marine Platforms Limited. The bank funded the acquisition of a multi-purpose support marine vessel that provides offshore support services to the Oil and Gas companies. Marine Platforms Limited is a frontline and the biggest indigenous service provider in the upstream sector of the oil and gas industry, providing wellbore clean out, subsea solutions and vessel chartering services in Nigeria and across the continent.

Oguntayo had said the bank was happy to support indigenous participation and local content in the nation’s oil and gas sector, particularly the upstream end. He had promised the bank’s continued partnership with and assistance to the company to enable it fulfil its vision and corporate objective of being an industry leader in the provision of support services to the oil & gas companies.
The Chief Executive Officer of Marine Platforms, Taofiq Adegbite had said: “Skye Bank has been helpful from day one; they have provided us with the financial muscle needed to succeed in our line of business.”

In order to ensure that SMEs don’t fail, the bank explained that it has developed a pool of well-trained employees whose mandate is specifically for customers in the SME segment.
“Our track record in this area, coupled with our exclusive training and re-training structures had enabled our employees to have a best-in-class understanding of the SME market. Our employees and executives have developed close relationships with the major promoters of businesses in this segment. Such close affinity has continued to place us at vantage positions in the face of competition.

“A testimony to our focus on this segment is clearly demonstrated by the creation of a dedicated SME department at the corporate Head Office, in addition to SME desks in all our branches nationwide. This enables us to anticipate our clients’ needs and provide commensurate services for mutually beneficial relationships.

“This unique structure and focus puts us at a major advantage in the SME segment above the bigger banks that mainly focus on the large corporate segment. Far more than any other bank in Nigeria, Skye Bank has a proven track record of taking relatively unknown SME start-ups from obscurity to relatively significant market share and public acclaim,” it added.