MSMEs face N13tn financing gap – PwC

Price Waterhouse Coopers has disclosed that Micro, Small, and Medium Enterprises in the country faced an N13tn ($32.2bn) financing gap.

PwC’s recent survey, titled “Building Resilience: Strategies for MSME Success in a Changing Landscape”, underscored the need for innovative solutions to bridge the divide and drive sustainable growth.

The survey included 567 MSMEs across 13 sectors and 29 states.

According to the report, over 67 per cent of MSMEs have experienced declining demand over the past two years, with high prices and low consumer spending cited as the primary reasons for this trend.

“Nigerian MSMEs require an estimated $32.2bn (N13tn) in financing. Micro and small enterprises, particularly in agriculture and retail, need loans under $20,000. However, limited private sector lending, poor infrastructure, and a lack of documentation hinder access to credit. While digital finance is emerging, innovation is crucial to bridge the gap and serve MSMEs effectively.

“Many businesses depend on family, friends, and bank loans, but they face high interest rates and stringent collateral requirements that limit their growth potential. Limited access to formal credit has been a significant obstacle for 35 per cent of surveyed businesses, which cite financing constraints as their most pressing challenge,” it stated.

The report added that headline inflation reached 28.92 per cent in December last year, driven by rising food prices, naira devaluation, and increased energy costs.

It noted that although inflation is expected to decline slightly to 21 per cent in 2024, MSMEs would likely continue to face inflationary pressures, affecting their operational costs and profitability.

The report emphasised the need for digital transformation as a strategy to enhance resilience among MSMEs.

According to the report, by adopting digital solutions for financial transactions, regulatory compliance, and marketing, businesses can improve operational flexibility and efficiency, expanding their market reach through e-commerce platforms and online marketplaces.

It also called for supportive policies to create an enabling environment for MSMEs.

“The government must implement reforms to reduce the financing gap, promote financial literacy, and encourage private sector investment in MSMEs to unleash their potential for economic development,” PwC stated.

The Country Senior Partner at PwC Nigeria, Sam Abu, remarked, “MSMEs are pivotal to Nigeria’s economic growth, but their potential remains untapped due to persistent challenges. Addressing these issues requires a collaborative effort between the government, financial institutions, and the business community to create a supportive ecosystem for MSMEs.”

The report noted that investing in skills development and fostering community engagement is crucial to strengthening the resilience of the MSME sector.

“To contribute meaningfully to Nigeria’s economy, MSMEs must embrace digital innovation and operate in a supportive business environment. Addressing the estimated $32.2bn financing gap requires government reforms, MSME advocacy, financial literacy programmes, and partnerships with investors. “Focusing on these areas will empower MSMEs to achieve sustainable growth. Our goal is to empower MSMEs, policymakers, and financiers with the knowledge needed to foster resilience and drive sustainable growth in this dynamic business landscape,” the financial consulting firm declared.

Meanwhile, workers globally have stated that they have been experiencing a rise in their workloads in the last 12 months, a PwC report has stated.

The latest report, titled: ‘PwC’s 2024 Global Workforce Hopes & Fears Survey’, stated that more than 56,000 workers across 50 countries and territories said they prioritised long-term skills growth to accelerate their careers amid rising workloads and heightened workplace uncertainty.