Nigerian MSMEs Face N617bn Credit Gap Yearly
The financing gap of Nigerian Micro, Small and Medium Enterprises has been estimated by PricewaterhouseCoopers to be about N617.3bn annually.
The consulting firm, in a latest study that examined the underlying issues MSMEs face in the country before the COVID-19 pandemic, noted that one per cent of the total commercial banking credit in 2018 went to small businesses.
The PwC’s 2020 SME survey report stated that access to finance, which is an enabler of business growth, was the most pressing challenge faced by small businesses.
The report said, “PwC estimates the financing gap for Nigerian MSMEs to be about N617.3bn annually (pre-COVID-19 pandemic).
“Based on analysis of data from the CBN annual statistical bulletin, small businesses accounted for less than one per cent of total commercial banking credit in 2018.”
It added, “Hence, in emerging markets and developing economies, 55 per cent to 68 per cent of formal SMEs are either unserved or underserved by financial institutions, leading to a total credit gap estimated to be $5.1tn.
“The SME credit market, however, is notoriously characterised by market failures and imperfections.”
Analysts at PwC led by the Country and Regional Senior Partner, PwC Nigeria, Uyi Akpata, said even though less than five per cent of SMEs had been able to access adequate finance for working capital and business expansion based on National Bureau of Statistics’ estimates, they contributed 50 per cent to Nigeria’s Gross Domestic Product.
The report added that finding customers, infrastructure deficit and insufficient cash flow followed closely as the most pressing problems of MSMEs.
According to the PwC, multiple taxation continues to remain a huge cause for concern to SMEs amid outdated tax laws, and many businesses believe that the government needs to do more to streamline taxes across the different tiers of government.
The report stated that about 57 per cent out of the over 1,600 business owners surveyed said multiple taxes and levies were some of their greatest challenges.