Capital market best place for long term funds — Experts tell SMEs

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By Peter Ejiofor
Lagos, April 30, 2021: Some capital market operators and chambers of
commerce have advised Start-ups and Small and Medium Enterprises
(SMEs) that the capital market was the best platform to raise long
term capital for their businesses.

They gave the advice at a webinar hosted by the Nigeria Exchange (NGX)
Ltd., on “Capital Raising for SMEs Through the Stock Exchange’’ on
Thursday in Lagos.

Mr Humphrey Ngonadi, President, South-East Chamber of Commerce,
Industry, Mines and Agriculture (SECCIMA), in his keynote address said
that enlightenment on access to finance was crucial to private sector
growth.

Ngonadi said: “The significance of the SMEs for growth and
competitiveness of the economy is universally recognised.

“It has been our experience in the chamber of commerce that SMEs face
a wide range of challenges that impact their potential which includes
financial mismanagement, poor record keeping, poor state of
infrastructure and multiplicity of taxes among others.

“Events such as those targeting enlightenment on accessing finance is
crucial to promoting private sector solution like the Nigerian
Exchange Growth Board which raises long term capital and promotes
liquidity for SMEs as well, economic growth and corporate governance.

“I hope that those aiming at other funding initiatives will be
extended to MSMEs to keep them afloat to support economic progress and
linkages to big companies,’’ he said.

Mr Olumide Bolumole, Divisional Head, Business Listing, NGX, said the
webinar was in furtherance of educating business promoters on the
alternative funding opportunities of the capital market to catalyse
business growth.

“SMEs outnumbers large companies and employ vast number of people.
According to the Nigerian Bureau of Statistics (NBS), SMEs contributed
about 48 per cent of the national GDP in the last five years with a
total of about 41.5 million enterprises with the South-South and
South-East region collecting 33 per cent of SMEs across all sectors of
the economy.

“This segment also accounts for 96 per cent of operational businesses
and 84 per cent of employment, in spite of all these, the economic
landscape among other challenges are daunting.

“They include multiplicity of taxes, levies and fees, lack of right
size and right priced financing, unavailability of needed corporate
governance to ensure maximised capacity utilisation and profitability
for the companies.

“The onset of COVID-19, recent inflation and Naira devaluation has
also negatively impacted businesses,’’ he said.

Bolumole, however, said that irrespective of the challenges, there was
a need for SMEs to upscale which requires a medium to long term
capital.

“Hence, the NGX has various products and services to support capital
raising of corporate.

“The NGX has the function to facilitate needed financing with over
N200 trillion in capital raised by government and corporate bodies in
2020 across various asset classes.

“While NGX has continued this year with about N2.4 trillion raised
through equity debt and other products,’’ he added.

Mr Ubong Akpainyang of the NGX in Port-Harcourt, spoke on the
importance of long term finances for start-ups and SMEs through
initiatives of the NGX and one of such initiatives being the Growth
Board.

Akpainyang said that accessing funding for start-ups and SMEs through
the exchange included, IPOs, placing, listing by introduction, rights
issue and special purpose acquisition company.

He explained: “The Growth Board is to encourage companies with high
growth potential to seize the opportunity of raising long-term capital
and generate liquidity.

“To carter for the various market segments and to ensure all sections
of businesses and companies in various growth stage can be served.

“To highlight the benefits available in the capital market for
start-ups, SMEs and technology companies.

“To provide market operators with a platform and access to potential
pipeline of companies for being on NGX.’’

He also said that the eligibility criteria for listing on the Growth
Board and NGX, noting that they were friendly and would encourage SMEs
to seize the opportunity.

Mr Dumebi Ohanusi, a capital market operator in the South-South, while
highlighting some of the challenges faced by businesses in the region,
said that fear of the source of the investor was a hindrance.

Mr Udesi Okwara, another capital market operator and President of the
Manufacturers Association of Nigeria (MAN), Edo branch, said that
accessing funds was a huge drawback.

Okwara said that the securities market was a platform that create
opportunities for raising long-term funds in IPOs for company growth
because most companies remained the way they started because there was
no growth.

Mr Reuben Ossai, said awareness of the activities of the exchange was
very low in the south-East and South-South region.

“You can understand this clearly when you get to the street, if you
just tell them that your company is listed on the Nigerian Exchange
Limited, they will ask what is listing.

“It is a major task that the exchange needs to take up for people to
be aware of the opportunities available and the gains of being listed
in the exchange,’’ he noted.

Prof Uche Uwaleke, President, Association of Capital Market Academics
of Nigeria, said that a recent study on the capital market awareness
ratio, showed that the South-South, South-East and North-East region
had the least of capital market literacy.

Mrs Constance Nwokejiobi, Director-General, Bonny Chamber of Commerce,
Industry, Mines and Agriculture harped on the need for capacity
building put together the exchange in collaboration with chambers of
commerce to promote awareness across the South-South and South-East
regions

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