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How SMEs can attract huge private equity investment’

By Helen Oji
01 December 2020   |   4:08 am
Participants at the Small and Medium Enterprises (SMEs) Finance Series Webinar, organised by the Nigerian Stock Exchange (NSE), in Lagos, weekend...

Participants at the Small and Medium Enterprises (SMEs) Finance Series Webinar, organised by the Nigerian Stock Exchange (NSE), in Lagos, weekend, have underscored the need to adopt strategies that would enable operators develop their business models and attract private equity investment.
   
The stakeholders, who bemoaned the comatose state of the Nigerian SMEs sector, especially with the ongoing COVID-19 crisis, submitted that if nothing was done urgently to revitalise this market segment, the rate of unemployment would worsen in the next few years.  
 
Speaking on the theme: ‘Private Equity: A Bridge or Albatross? Role of the Capital Market,” they maintained that given the sector’s contribution to the gross domestic product (GDP), there is a need to attract huge investment into the sector and maximize Nigeria’s economic growth.
   

 
Private equity is an alternative investment class and consists of capital that is not listed on a public exchange. Private equity is composed of funds and investors that directly invest in private companies, or engage in buyouts of public companies.
   
The President and Chief Executive Officer, Anabel Group, Nicholas Okoye, stressed the need to formulate a capital market strategy that deals specifically with SMEs.
   
“We need to go a step further, looking at SME bonds. Presently, we do not have an SME debt platform. There is a lot of fraudulent Collective Investment Scheme (CIS) out there to dupe people; we need to get these CIS to support SMEs. We have to do a lot of thinking outside the box if we must develop this sector. SME capital market strategy is required to make any intervention in the sector workable.
 
“We need to look at the creative industry, Fintech, and other industries that have a tendency to boom and sell in the next few years and create specific funding strategies for these sectors. We also need to give them access to sell products in a sustainable market to enhance investment returns,” he said.
     
The Chief Executive Officer, FMDQ Group, Bola Onadele, said 90 per cent of Nigerian businesses are made up of SMEs, while 84 per cent of employment is generated by the sector.
   
He stressed the urgent need to restructure the sector and attract investment from private equity firms and venture capitalists, to enable the country to speedily wriggle out of the devastating effect of COVID-19 on the economy.
   
Onadele, who was represented by the Managing Director, Oye Onwuka, said: “Technology is a major part for us to reach out to this sector. Structured SMEs will help to unburden and connect to prospective investors.

“FMDQ private market in the near future will develop solutions that would support startups from growth phases and attract capital that would enable them to list in larger exchanges.”
   


Divisional Head, Trading Business, the NSE, Jude Chiemeka, said SMEs play a role in mitigating the problem of imbalance in the balance of payment accounts.
   
According to him, through its export promotion, SMEs accounted for 7.27 per cent of goods and services exported out of Nigeria in 2019.

“SMEs contribute significantly to the nation’s GDP and are critical to stimulating economic growth. They form the catalysts required for the economy to navigate the pandemic. With these, it becomes critical that this group is assisted to meet whatever challenge confronting them presently,” he said.
 
Managing Director of NASD Plc, Bola Ajomale, urged SMEs to ensure that they disclose information about their company with proper documentation to make it easy for investors to buy into these firms.
 
He said a well-structured and outlined business strategy would make financing or funding easy for investors, and advised them to determine what kind of investors or shareholders they need for their business model at the start.