Nigeria: Businesses Urged to Embrace Foreign Equity Investment

5 August 2020

The Chairman of Invest Africa, Mr. Rob Hersov, has advised Nigerian entrepreneurs to promote successful international partnership and equity investment in their businesses.

Hersov, said the winning business formula has always been, "local expertise plus international strategic capital equals to market leading businesses."

He gave the advice recently, when he presented a paper on, "Access to International Capital and Funding Solutions" at a Webinar that was hosted by the Lagos Chamber of Commerce and Industry (LCCI) with the theme "Access to International Capital and Funding Solutions for Nigerian Businesses."

The chairman of Invest Africa stated that the right foreign equity partners could be hugely beneficial and help take local businesses to the next level.

Hersov, who was the keynote speaker at the conference, emphasised that Nigerian entrepreneurs were at no risk of being dis-intermediated with the injection of international equity capital into their businesses.

He said: "If you develop a strong business relationship with the right funding partners, investors will seek you out to provide further opportunity to create scale through the acquisition of competitors or regional expansion."

Hersov, however, noted that African businesses would rather focus on taking on debt which then puts strain on their business and reduces their ability to grow than to give away equity to will international investors.

The President of the LCCI, Mrs. Toki Mabogunje, quoting Central Bank of Nigeria's statistics to have disclosed that the total gross credit to the private sector stood at N18.90 trillion at end-June 2020, which represented about 13 per cent of the Gross Domestic Product (GDP).

Similarly, the World Bank statistics showed that Nigeria's 10.5 per cent of the GDP domestic credit to private sector in 2019 was one of the lowest in world, she added.

"It is therefore evident from the statistics above that the size of credit to private sector (as percentage of GDP) is largely insufficient to meet the demand for finance by private sector thereby creating a huge funding gap and liquidity challenge to meet working capital requirements and finance new projects and expansion of existing ones," she said.

However, the Central Bank of Nigeria (CBN) has launched policies that would improve credit penetration in the Nigerian economy.

According to the Senior Manager, Development Finance Department of the CBN, Mr. Zephaniah Chinedu, the central bank has found a way through the commercial banks to create enabling environment in which a bank that is committed to funding businesses would find opportunities to do so.

Chinedu said: "The CBN has brought out real sectors' support that targets every manufacturer to access finance on a long term. We need to highlight the tenor of the funding because the financial system facilities are preponderantly short termed.

"The long termed lending enable entrepreneurs to utilise the fund and be able to make some money before they start to repay. These facilities cover the large scaled manufacturers as well as the Small and Medium Enterprises."

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