Enhanced banking regulation by the Central Bank of Nigeria (CBN) has sharpened banks’ loan assessment skills, making the lenders to create better loan options for Small and Medium Scale Enterprises (SMEs).
The SMEs sub-sector currently faces constraints which tend to limit its ability to realise its full growth potentials. These constraints have been identified to include competition, infrastructure, taxes, accounting, management, marketing, economic planning and poor funding. Poor economic conditions, which also implie poor finance and inadequate infrastructure, have been identified as the most crucial factors.
This position was corroborated by other studies which identified financial support as one of the main factors responsible for small business failures in Nigeria.
Speaking during a Small and Medium Scale (SMEs) seminar organised by Skye Bank in Lagos, it’s General Manager, Retail Banking, Mrs. Arinola Kola-Daisi, said reforms in the banking sector have also put higher risk management systems in place, ensuring that SMEs get loans and repay them as at when due.
She said the banking sector is well regulated now than before, making loan approval process strict, as banks no longer experiment with depositors’ funds, adding that banks now look at ways of improving customer services and helping emerging businesses to grow.
Mrs. Kola-Daisi, said SMEs constitute an important vehicle for national development as they have the capacity to integrate a large segment of the populace in productive economic activities. Specifically, she said the economies of the Asian Tigers or Asian Dragons of the highly free and developed Hong Kong, Singapore, South Korea, and Taiwan, owe their rise to economic pre-eminence to an extent, to the existence of well-organised and efficiently run SMEs.
She noted that the Tiger Club Economies of Indonesia, Malaysia, the Philippines, and Thailand, follow the same export-driven model of economic development pursued by the four dominant Asian Tigers where SMEs constitute a sizeable vehicle of bringing about development and have remained so till this day.
She said SMEs remain a tool for employment generation and providing opportunities for entrepreneurial sourcing, training, development and empowerment. Developing nations such as Nigeria characterized as low income earners by the World Bank, value SMEs for several reasons.
She said SMEs have generally achieved decent levels of productivity, especially of capital and factors taken together while also generating relatively large amount of socio-economic development. The SMEs sector is viewed as being populated by firms most of which have considerable growth potential.
The Skye Bank SME seminar tagged: ‘It is Possible’ was meant to tackle financing challenges being faced by the subsector headlong. It was attended by young business owners and entrepreneurs who are bogged down by the constraints of finance and other stifling conditions to chart a success path for their growing businesses.
The seminar was one of the bank’s contributions to support and promote the growth of SMEs as the growth engine of the Nigerian economy. The well attended seminar was not only rich in content but the experience sharing was also pivotal as it helped boost the resolve of those present to continue to work hard for success to beckon.
It had in attendance many operators in the SMEs sector who came to gain fresh and new insights and trends into the operations, financing and management of SMEs.
Declaring the seminar open, the bank’s Managing Director, Kehinde Durosinmi-Etti, represented by Executive Director, Corporate and Investment Banking, Timothy Oguntayo explained that the lender organised the seminar as part of its contributions to the development of SMEs in the country.
He said the SMEs sector was an important sector as it provides more opportunities and employment than the mining, oil and gas sectors. Indeed, the sector can increase economic opportunities for those who have not been able to participate directly in large-scale projects.
“‘Without doubt, the SMEs sector has the capacity to drive and encourage indigenous business and rural economic development that help people create wealth and contribute to national development’”, he said.
Durosinmi-Etti said the SMEs sector has the capacity to solve Nigeria’s rising unemployment challenge adding that the lender would continue to play the role of a facilitator and development partner to help young businesses grow and realize their full potentials to the benefit of the nation, the people and the economy.
Managing Director of the Wedding Store, Mrs. Bolanle Koya, advised start up enterprises to shun ostentatious life style but to work on improving their offerings until their services or products have become successful and embraced in the market.
The entrepreneur took the audience down memory lane about how she started small, shunned a life of flamboyance at the beginning and how she overcame the initial challenges of access to funding. According to her, small enterprises should grow organically and be mindful of cost.
Another entrepreneur, Chinedu Nwobi who is the Managing Director of Everrise Wire and Cable Limited, told participants that the business which started as a trading concern some years ago is now into manufacturing of cable and wires. According to him, after leaving school and serving his apprenticeship, he chose to deal in original cable products.
This, he said, set him apart from the others who were selling sub standard materials. Before long, his fame and acceptance became widespread and opened flood gate of opportunities for him. He urged the participants to build their businesses on honesty, integrity, and trust.
He said ideas are also key in starting up a successful business. He said entrepreneurs also need to be creative to succeed. He said customer service is a key factor that determines whether a business succeeds or not. “When customers are well treated, they see you as a friend. When you allow customers to know that as your business is growing, they too, will be growing, they will give you their support,” he said.
Nwobi said small businesses also need to address the issue of succession plan. He regretted that in many small businesses, once the owner dies, the business also dies. He said building an investors’ team that will spell out succession plan, ensures that business continues when the owner dies. He also advised small business owners to run their firms with integrity. He said, doing so pays, not only in the short run, but in the long run.
Skye Bank officials said the SMEs seminar series would continue and many entrepreneurs would be supported to grow their business from small enterprises to large manufacturing outfits that would in near future attain the status of global brands.
Role of leasing in project financing
Leasing has also been identified as a significant financing alternative for projects and businesses that would create wealth for the economy, Executive Secretary, Equipment Leasing Association of Nigeria (ELAN), Andrew Efurhiewe, has said.
He explained that globally, leasing has been used to facilitate the sale of vendors’ goods, enhance lessors’ profits and grant lessees the access to productive assets.
He said the lessor, vendor and lessee, need to collaborate for them to achieve set objectives. “There exists a communication gap between the lessor and vendor which must be adequately bridged to produce a more robust leasing environment.
He said the potential of leasing is high, considering the low lease penetration in Nigeria in comparison with other countries, stressing that there is need to regulate the activities of vendors in order to check the unscrupulous acts of some that are detrimental to the growth of the industry,” he said.
Efurhiewe said professionals should facilitate accurate valuation of leased assets and create a strong secondary market for used assets. He said improved synergy between lessors and vendors will create growth and employment for the economy.
He said ELAN is going to liaise with vendors and other stakeholders to create an efficient leasing industry that will continue to build wealth for the economy. He said the body will continue its proactive initiative by bringing to the membership fold reputable vendors and work towards setting standards for their dealings with lessors.
Lessors should know their vendors very well and ensure they understand their products to enable them educate the final users of the assets, he said, stressing that Vendors should support efforts of ELAN, in its pursuit of establishing the leasing law aimed at improving the regulatory framework for the leasing industry that will invariably create more businesses for vendors.
DMO
The Debt Management Office (DMO), said it is looking for an international bank and a local lender to act as co-arrangers for N80 billion depository note to be issued this year.
The debt office in a notice, said it has appointed a sole depository bank and an arranger for the offering, but did not give any names. Hoever, a source at DMO said Nigeria has mandated Citibank to act as the depository bank. Bids for co-arrangers are due on October 3. Nigeria is increasing the amount it borrows from overseas to around 40 per cent of all debt over the next three to five years, from 12 per cent, seeking lower funding costs.
The debt office in May said it would issue N80 billion in global depository notes this year, after a $1 billion Eurobond, to deepen its footprint in international debt markets.
Citibank and Deutsche Bank acted as advisers on the $1 billion Eurobond issued in July, which was four times oversubscribed. Nigeria also plans to issue $100 million in Diaspora bonds this year and is seeking advisers. The DMO said the depository note will be documented under U.S. rules and listed in Europe.
Money market review
Rates across all tenors moved higher by an average 230 basis points (bps) last week. The call rates gained 262 bps, while the 180-days rates gained 216 bps. Week-on-Week however, rates jumped by an average 600bps across all tenors. The call and seven-day rates both climbed the highest week-on-week by 730 bps to 19 per cent, and 19.3 per cent respectively. The Nigeria Interbank Offered Rate (NIBOR) is expected to re-stabilize back in the coming weeks.
In the Treasury Bills market, liquidity eased following the maturity and repayment of N97.2 billion Open Market Operation (OMO) bills by the CBN. The apex bank subsequently mopped up excess liquidity selling N84 billion in OMO bills.
Forex market review
The CBN last week, offered $600 million at the Wholesale Dutch Auction System (WDAS), while a total of $525.1 million was sold, $266.6 million on Monday and $258.5 million on Wednesday’s auction respectively. The Marginal rate at both auctions remained at N155.76 to a dollar.
The Naira however lost 50 kobo Week-on-Week at the inter-bank market, to close at N163.60 to a dollar from N163.10 to a dollar previously.
