Wealth Mapping of Funding Sources and Financial flows for Businesses in Nigeria

Client Name: United Kingdom Foreign and Commonwealth Development Office (UK FCDO)
Project: LINKS – Powering Economic Growth in Northern Nigeria
Date: February – June
Location: Nigeria (Kano, Kaduna and Jigawa)

By: Henrietta Ifyede,
Analyst, International Development

In many countries, including Nigeria, Micro, Small and Medium Enterprises (MSME) are the key drivers for socio-economic growth. The Central Bank of Nigeria (CBN) states in its economic report that 96% of businesses in Nigeria are in the SME category, and they also contribute about 48% to the country's GDP. MSMEs present a critical platform for boosting technical, technological, and entrepreneurial capacities amongst crucial segments of the populace. They are best described as the powerhouse of any economy, contributing significantly to its development, job creation and export, amongst others.

According to the National Bureau of Statistics, Nigeria's unemployment rate rose from 27.1% to 33% by the end of 2020, making it the second-highest on a global scale. However, MSMEs have played a huge role in tackling unemployment and inadvertently reducing poverty in the country.

A significant challenge for MSMEs in Nigeria is general access to the finance needed to scale their business operations. Inaccessibility to funding sources and the difficulty of raising capital has led to many promising businesses' premature death.

There are many factors that are vital in accessing finance from traditional financial institutions or existing sources. In addition, the lack of structured or organised information through a single source on how to access finance further compounds the challenges associated with getting funding.

Phillips Consulting (pcl.) was contracted by the United Kingdom (UK) Foreign Commonwealth Development Office (FCDO) LINKS Programme for Powering Economic Growth to conduct a Wealth Mapping project across Nigeria for alternative access to Funding Sources and Financial Flows for Micro, Small and Medium (MSME) Enterprises for business growth and job creation.

pcl. is a primary consortium member in the seven-year UK-FCDO funded LINKS Programme for Powering Economic Growth in Northern Nigeria.

This project involved pcl. providing in-depth advisory and technical services to conduct comprehensive research and data gathering activities for alternative sources for access to finance for MSMEs to grow and expand their business. The project is part of the overall national job creation and poverty alleviation agenda. The key objective was to help understand the options available for addressing the gap between the demand side of investments and the sources of funds for investments.

pcl. was tasked to research and map the various sources of private and institutional funds (including private wealth, High Net Worth Individuals, crowdfunding, philanthropy, trust funds, charities, international finance institutions, Faith-Based organisations, Venture Capitalists (VCs), NGO grants, and CSR programmes) for investing and categorised them along different lines, gathering information such as risks appetite, industry preference, and deal size limits.

A team of pcl. research experts, data scientists, business and digital technology consultants mapped a comprehensive list of different categories using a set of qualitative and quantitative methods to gather alternative finance sources. The team subsequently designed and developed a robust and sustainable database of potential funding sources and a comprehensive supporting report to guide the overall programme.

We deployed a combination of accelerated and collaborative data gathering approaches, under the guidance of the COVID-19 protocols, including utilising long-standing relationships with institutions and organisations built over the years. The methodology included interviews (in person or phone), questionnaires (online and in-person) and focus-group workshops to gather the data and information required.

Our comprehensive report highlighted the top priorities for impact investors, including their risk appetite, preferences on ROI and preferred investment locations. Our recommendations also included investor engagement strategies for the participation in powering economic development for job creation and poverty alleviation in Nigeria.

This wealth mapping study would be used to develop multi-faceted finance options for MSMEs in Nigeria. It would also help MSMEs make targeted pitches to potential investors based on the profiling of the categories from the study. This study would also help guide the FCDO-LINKS team to provide innovative and alternative financing solutions for MSMEs to help meet the programme's overall goals.