Forex, reputation issues bane of capital inflow into Nigerian businesses
International investors and stakeholders have attributed businesses’ inability to attract foreign capital needed for growth to Nigeria’s image problem, and challenges in repatriating investments.
According to them, while Nigeria should be at the top of the list for investments in Africa, governance issues remain an impediment, making the country look problematic compared to other smaller countries.
Of the $5.85billion received in the first quarter (Q1) of 2020, portfolio investment accounted for 73.61% ($4.31billion) of the total capital importation recorded by the National Bureau of Statistics (NBS).
Speaking at a webinar on, “Access to international capital and funding solutions for Nigerian businesses”, organised by the Lagos Chamber of Commerce and Industry (LCCI), Monday, Keynote Speaker, Robert Hersov, said a critical factor limiting many businesses from accessing the needed capital is the country’s image, which has been seriously battered.
He added that Nigerian banks need to be encouraged to lend to businesses, as they are too risk-averse and would rather sit on massive portfolios of government bonds than lend to businesses.
Hersov, also the Founder and Chairman, Invest Africa, equally charged many businesses owners to embrace equity rather than resorting to loans to scale up faster and compete effectively.
“Funding options available include debit and equity from international investors, as significantly increased interest in Africa from strategic investors is making them take a long term view on the continent.
“Similarly, local entrepreneurs should leverage the partnership to scale up their businesses. They should be less concerned about giving away equity rather than embracing debt alone for business growth, as the right equity can help businesses grow,” he added.
LCCI President, Mrs Toki Mabogunje, noted that the demand for finance and the challenges to accessing it necessitated the need for the forum.
According to her, with COVID-19 affecting available capital to scale up, businesses need to explore different alternatives that would aid access to funds.
Mabogunje, who was represented by the Vice-President, Mrs Mojisola Bakare, identified various intervention programmes unveiled by the Federal Government, urging that issues constituting impediments to growth should be addressed.
“Prior to the COVID-19 pandemic, businesses were increasingly finding it difficult to access finance through the domestic financial system given the high borrowing costs associated with a credit facility in conventional banking systems. Moreover, the COVID-19 has elevated the risks and uncertainties around capital and finance generally in view of deteriorating business and economic outlook.
This scenario, therefore, reinforces the need for businesses to explore alternative funding solutions available on global as well as local space.
“To unlock access to international capital and finance for Nigeria businesses, we need to holistically and very quickly address issues that have constituted impediments over the years in order to align the expectations of investors with the priorities of business owners,” she added.
One of the panellists, Senior Counsel, Dentons UK and Middle East, Raj Kulasingam, said there was a need to address timelines for projects to avoid currency fluctuations as well as provide capital for early-stage businesses.
To him, the biggest challenge for many businesses is accessing local capital in Nigeria for projects.
Managing Partner, Acuity Ventures, Lexi Novitske, noted that a lot of businesses that attract funding are structured outside the country due to different issues like IP protection, but local structures need to be supported, especially at the start-up phase. This is a barrier we are trying to address.
“Currency issue remains a challenge, considering that revenues are generated in a local currency, but capital is sourced in foreign currency. That poses a huge challenge to businesses. Also, IP protection, governance/legal protection for investors, access to capital, and exit opportunities affect investments,” she added.
Director, Middle East and Africa, Jersey Finance, Faizal Bhana, noted that investors want to be able to invest in jurisdictions that make it easy for them to move capital.
Similarly, other stakeholders emphasised the need to develop capacity was equally emphasised in order to ensure proper utilisation of capital.
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