Stakeholders Explore Private Equity As A Bridge For SME Financing Through The Capital Market

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Tuesday, December 01, 2020 / 10:00 AM / Nifemi Taiyese for Proshare WebTV / Header Image Credit: WebTV


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The maiden edition of the SME Finance Series webinar themed Private Equity: A Bridge or an Albatross? Role of the Capital Market convened by Mr. Joseph Edgar Co-Founder & Director, Hamilton & George Limited, Dr. Ore Sofekun Founder, Foothold Advisors and Mr. Brainerd Efe Odiete Partner, Africa Strategy Advisers brought together stakeholders who brought to the fore the significance of the capital market in the development of Small, Medium Enterprises.


In delivering the introductory remark, Mr. Joseph Edgar said the virtual event was put together for the purpose of seeking solution to sourcing capital by MSMEs which would help turn the economy around.


He said that MSMEs need access to institutionalized funding, through vehicles like Private Equity (PE) that would enable them create wealth and jobs which is why the forum was so essential.


In his presentation titled 'SME funding and Entrepreneurship Development in Nigeria' Dr. Nick Okoye Chairman, Nick Okoye Organization & former Executive Director NSE emphasized that before SMEs can thrive in Nigeria there is a need to support them and understand their ecosystem.


He called for an SME capital market strategy as capital is one of the fundamental problems SMEs face. The strategy, according to Okoye, should cover the following areas;

  1. SME bond designed on a state by state basis
  2. SME collective investment schemes: savings bond, equity trust, land bank trust etc.
  3. SME equity platform
  4. SME debt platform and
  5. Asset Backed securities and cash flow securitization


For young individuals that are trying to get into the SME market post COVID-19, Dr. Nick Okoye advised them to focus on the friendly growth industries such as science, technology, engineering and mathematics (STEM), Creative Industries, Fintech and Ed tech.


According to him "The strategic positioning of SMEs and entrepreneurship will reposition Nigeria". To support SMEs the right way, the investment banker said it was time to change approaches and implement alternative funding strategies.


Furthermore, he said entrepreneurship capacity development was very important to grow SMEs in Nigeria, he emphasized constant learning and skills training which would help them build and develop.


Mr. Bola Ajomale CEO NASD Plc. In his remarks said  the role of NASD was to match investors to companies ensuring transparency in adherence with capital market best practices. He also mentioned that many of the companies in the tech industries have been very successful at raising capital.


Addressing the structure of NASD the CEO highlighted the fact that the Exchange was geared towards growing smaller companies. To walk up the capital raise bridge, Ajomale advised SMEs to register their businesses, document their journey, join a trade group, get due diligence advisers, identify priorities, and prepare for partners to be a part of their companies.


Also speaking at the Webinar Mr. Jude Chiemeka the Divisional Head ,Trading Business, The Nigerian Stock Exchange (NSE) revealed that as policy makers brainstorm on ways to stimulate the economy providing liquidity to support SMEs, it is a very significant step because of their role as economic catalysts.


"Nigeria has a total of 41.5 million micro, small and medium enterprises that constitute the growth sector, in 2019 SMEs also accounted for about 7.27% of goods and services exported out of Nigeria" he said.


Chiemeka cited a PwC Nigeria report that estimated the yearly financial gap for Nigerian SMEs at N617.3billion as at the end of 2019. He noted that under the right corporate structures and platforms these liquidity pools can plug the financing gap for SMEs and also the NSE Growth Board, creates a platform for SMEs to connect with this liquidity pool.


Speaking further he stressed that the NSE Growth Board is an initiative designed to meet the needs of fast-growing companies such as SMEs.

 

Speaking on the benefits of Growth Board to Issuers DH Trading Business, the NSE Divisional Head Trading Business said it helps to ensure increased corporate governance while providing the necessary support mechanism/framework for sustainability.


Looking at "Unlocking the Nigerian Capital Markets for SMEs: A Roadmap" Mr. Oye Onwuka, Ag. MD, FMDQ Private Markets, said 90% of Nigerian businesses are SMEs which contribute 84% of total employment and 48% of GDP contribution and as such should not be neglected.


"Nigeria stands to gain significantly from the product and service value which SMEs, if supported, could bring to the economy; finding solutions to revitalizing and deepening the sector must be a front burner bun" Onwuka said.


Shedding further light on funding sources  he stated that 48% of family and friends are the most popular financing sources, 15% are obtained through short term credit facilities and only 0.3% of commercial banks credit is available to SMEs. The challenges that SMEs face come under the broad umbrellas of governance, payments, financing and scaling.


The Ag. MD, FMDQ Private Markets highlighted that governance, separation, business structure, discipline, transparency, management, business drivers and services are  key indicators on the roadmap for SMEs to access capital through the FMDQ.


Mr. Brainerd Efe of Africa Strategy Advisers in his comments emphasized that the cultural perception/barriers around SMEs needs to be addressed through engaging the key business players.  He opined that if the capital market operators can be more feasible then growth can be spurred.


A lot more around financial education needs to be done as he stated that business advisers and financial experts need to play a key role in explaining to small businesses complex financial terms and provide them with other forms of support.


Giving her closing remarks, Dr. Ore Sofekun advised SMEs to consider the importance of starting a business with the right framework and thereafter building on the proper foundations which would steer such business along the path of sustainability.


The webinar featured the following speakers Mr. Paul Calvey Partner, Head of South Africa, Oliver Wyman, Mr. Olumide Bolumole Divisional Head, Listings Business NSE, Mr. Archie Stebbings Partner, Head of Market Infrastructure Risk, Oliver Wyman, Mr. Yemi Osinubi Head, Private Capital, FMDQ Private Markets Limited, Mr. Ugodre Obi-Chukwu Co-founder Nairametrics and CMO Ikeja Electric, and Mr. Teslim Shitta-Bey, Chief Economist/Managing Editor of Proshare who moderated the panel session.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

 

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