Why SMEs struggle to get investors — Experts

Experts have listed access to funding, lack of trust and focus as among the reasons discouraging investors from investing in Nigeria’s Small and Medium Enterprises (SMEs).

These and many more dominated discussions at the just concluded Nairametrics 2020 Economic Outlook held in Lagos.

Responding to a question from one of the participants at the Nairametrics 2020 Economic Outlook, Cheta Nwanze, Founder, SBM Intelligence, said Nigeria being a low trust country has a negative impact on investors’ willingness to invest in small businesses.

Nwanze said despite the trust issues affecting Nigeria’s image, there are individuals who still attract capital from investors only to use the funds for their personal gains, rather than for the growth of the business; this, he said, is telling on the reluctance of investors to infuse capital into small businesses.

“The fact that these things can even happen in a country that has a poor culture of accountability, then expecting people to come invest in a company that is just starting becomes harder, the risks are higher, and as a result, the entry threshold becomes a lot higher.”

Economic expert and Research Analyst, Wale Smith, also said Nigerians are often reluctant to allow outsiders buy into their family businesses, unlike the western world. Some individuals find it hard to let go of control of their businesses, thereby affecting the interest of investors in SMEs in Nigeria.

Smith opined that business structure of these SMEs is one of the reason investors shy away. Smith said structure is important if small business owners want to pull the attention of investors. He explained that the structure has to be one that the owner can’t just wake up one day and clear the business and leave.

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