Equipping entrepreneurs with financial literacy skills
The emergence of Nigeria as the biggest economy in Africa has not led to the expansion of financial literacy in the country. Experts had argued that the provision of financial literacy training for consumers was necessary to develop the nation’s financial services markets.
They submitted that financial literacy is necessary for entrepreneurs, as it would create the foundations for the growth of the country’s economy. They noted that financial literacy training was effective in providing the financial skills necessary for entrepreneurs to manage their businesses and improve access to funding.
The Central Bank of Nigeria (CBN) had noted that financial literacy was a barrier to business management and that the number of people affected was huge.
The apex bank warned that until changed, many Nigerians would be unable to participate fully in the formal financial system, thereby contributing towards the development of the economy.
It stated that financially literate consumers would benefit the Nigerian economy by increasing the demand for financial products, which would in turn support the creation of stronger financial institutions and sustainability of the financial services industry.
A recent survey of Nigeria’s Micro, Small and Medium-sized Enterprises (MSMEs) entrepreneurs conducted by the FATE Foundation, in association with Association of Chartered Certified Accountants (ACCA) Nigeria, showed that the vast majority of MSMEs in Nigeria have limited financial literacy.
The study validated the importance of financial literacy in building sustainable businesses in Nigeria. The report, which detailed convincing evidence of the importance of financial literacy for MSMEs, explained that the limited financial literacy of Nigeria’s wider population represents an economic challenge and seriously restricts the development of its MSME sector.
Former Minister of State, Ministry of Industry, Trade and Investment, Aisha Abubakar, in her remark on the report, maintained that financial literacy had been globally recognized as a major life skill and a factor of economic stability. She said the skills encompassed knowledge, cognitive skills and attitudes to financial matters.
According to her, a more financially literate MSMEs sector would spur attendant externalities to the economy, such as improved entrepreneurship capacity, private entrepreneurship and linkage with financial services, and more efficient use of financial services and resources.
She added that the implementation of the findings of the study would ensure rapid improvement in financial literacy, and hence promote inclusive and sustainable growth within the MSME ecosystem that would position the MSME sub-sector as a catalyst of economic growth and job creation.
The report defined financial literacy for entrepreneurs as having the knowledge required to plan and manage business finances; identify funding requirements and prepare the documentation required; manage financial risk; understand the financial and economic landscape concerning the business; and comply with financial regulation.
The survey showed that the limited levels of financial literacy among entrepreneurs in Nigeria are a significant factor in the equally low levels of access to external finance.
However, those entrepreneurs who have undertaken financial literacy training reported significant benefits, recognising that greater financial literacy would assist them in running their businesses more efficiently.
The report recommended the expansion of financial literacy training in Nigeria, in particular for entrepreneurs in charge of MSMEs.For this approach to be successful, the report said more entrepreneurs needed to be persuaded of the benefits of financial literacy training.
It harped on Standardisation of Business Development Service Providers (BDSPs) and financial literacy training programmes that would raise the quality of education and allow all entrepreneurs to broadly access the same level of training regardless of where they acquired it.
The report explained that financial literacy training should include the development of business plans, understanding the differences between available types of external finance and their suitability for various types and sizes of business.
While urging that there should also be a wider range of options available in terms of how financial literacy is taught, it further explained that the provision of practical learning opportunities was a crucial factor in the success of financial literacy training.
It added that continuous support should be available after the financial literacy training had taken place to ensure that entrepreneurs continue to use the knowledge gained.
The report recommended the need for expanding the provision of financial literacy training, especially for entrepreneurs, including those in charge of MSMEs. It recommended the need to demonstrate the importance of financial literacy, standardise BDSPs and a national financial literacy curriculum, focus on key areas in financial literacy and provide practical learning opportunities among others.
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