Optimising the role of MSMEs in Nigeria

Genesis was commissioned to assist EFinaA to understand the role of micro, small and medium enterprises (MSMEs) in Nigeria, and make recommendations to government and financial institutions to improve credit access of MSMEs in the future.

The project involved a combination of desktop research and in-country visits to interview key stakeholders relevant to the MSME financial intervention in Nigeria.

The best practice highlighted six key forms of intervention including the general regulatory environment present in the country, partial credit guarantee schemes (PCGs), state banks and donor organisations, apexes and wholesale funding, supply-side capacity building, and encouraging innovation. Each of these forms of intervention was analysed to understand the key design features and drivers of success, and under which circumstances they were best able to perform.

In-country interviews established the key interventions that were taking place in Nigeria as well an understanding of their levels of success. These interventions and their modalities were then compared with the key success drivers identified in the international best-practice piece to understand reasons for success or failure.

It was clear that Nigeria realises the need to develop the MSME market as a key driver of growth and employment in the country. The government has invested significantly in various initiatives, mostly particle guarantee schemes (PCGs), wholesale funding and supply-side capacity initiatives. This was done to intervene in the lack of finance flows to the market.

The lack of sufficient segmentation in the market has meant that much of the efforts have been misdirected, i.e. PCGs targeting smaller businesses have been designed with a larger customer in mind, affecting its effectiveness. The report suggested a number of adjustments that could help to optimise the performance of this funding in the future.