What are the ways of funding SMEs in Nigeria?
Struggling to secure the necessary funds for starting your own business might not be an easy one considering the failing economy in Nigeria today. ok, let me give you the shock of a century do you know that there are ways of funding SMEs in Nigeria through additional funds which will become the game-changer you have been looking for when you’re about launching a new venture or expanding an existing one sorry I bet you know this.
SMEs in Nigeria have contributed about 50% of the national GDP in the last five years according to an up-to-date study from ResearchGate. They also account for about 50% of industrial jobs and nearly 90% of the manufacturing sector, in terms of several enterprises with a total number of about 17.4 million.
In Nigeria, however, SMEs face a myriad of problems. Nigerian SMEs are constantly in need of governmental and non-governmental support to thrive sustainably in the Nigerian business ecosystem from the unfriendly/unstable business environment to the lack of accessible funding or finance. So a lot of persistent Challenges hinder their growth and development and although significant improvement has been achieved in recent times, there is still much work to be done, despite the significant contribution of SMEs to the Nigerian economy.
To lighten up the financial burden that startup SMEs do face, the Nigerian government and several private organizations have made efforts in the course of establishing platforms that provide existing and prospective SMEs with funding opportunities. This article will examine 11 avenues that SMEs in need of funding may explore to overcome their specific business challenges.
Funding Option by Usage
| Funding Option | Usage (%) |
|---|---|
| Bootstrapping | 50% |
| Bank Loans | 25% |
| Government Grants | 15% |
| Angel Investors | 5% |
| Venture Capital | 3% |
| Other | 2% |
11 Key Grant and Funding Opportunities in Nigeria
- Bootstrap
- BootstrapCrowdfunding
- YouWIN Connect Nigeria
- Bank of Industry (BOI)
- Tony Elumelu Foundation (TEF) Entrepreneurship Programme
- Lagos State Entrepreneurs Trust Fund (LSETF)
- GroFin Fund
- Africa’s Young Entrepreneur Empowerment Nigeria (AYEEN)
- Shell LiveWire
- i-DICE Program
- Orange Corners Nigeria
Bootstrap
The process of starting and growing a business is called Bootstrap this is a situation whereby you rely solely on your personal finances and revenue generated by the business. In essence, it involves self-financing the venture.
Data Insights
- Freelancing and Bootstrapping: A lot of people are using their freelance income to fund their business ventures, with about 35% of the American workforce being freelancers in the U.S. There are predictions by (Neil Patel) that up to half of the American workforce could be freelancers shortly yet this trend is expected to rise.
NOTE: In the coming years just similar to the way it happened in the United States. We are optimistic that this trend will equally expand significantly in Nigeria. Factors such as increased internet penetration, the growth of the digital economy, and a favorable regulatory environment are propelling this growth.
Requirements for Bootstrapping
- Financial Discipline: To ensure the business can sustain itself without external investment. careful management of funds is needed.
- Strong Business Plan: financial projections, and strategies for growth, with a detailed business plan outlines the business model.
- Diverse Skill Set: To handle multiple roles within the business entrepreneurs often need a variety of skills, including marketing, sales, finance, and operations.
- Time Commitment: Time and dedication from the entrepreneur is highly required for bootstrapping.
- Resilience: For bootstrapped businesses the ability to overcome challenges and setbacks is essential.
Impact of Bootstrapping
- Complete Ownership: Full control over the business and decision-making will be retained by the Entrepreneurs.
- Financial Independence: Avoiding investor interference and dilution of ownership.
- Learning Experience: In managing finances, operations, and marketing bootstrapping provides valuable experience in these areas.
- Faster Decision Making: Decisions can be made more quickly without the need for investor approval.
- Potential for Higher Valuation: When seeking investment in the near future a successful bootstrapped business can command a higher valuation.
Expected Outcomes
- Sustainable Growth: Building a profitable business with consistent revenue generation.
- Customer Loyalty: Through exceptional products or services you can develop a strong customer base.
- Market Leadership: Through innovation and customer focus you have the power to establish a strong market position.
- Financial Stability: Achieving financial independence and profitability.
- Preparedness for Investment: For future growth and investment it helps build a solid foundation.
Angel Investors
Typically in exchange for ownership equity an angel investor comes in as an individual who provides capital to a business or businesses. Traditional funding sources like banks or venture capital firms can be hard to get in this case Angel investors steal the show by investing in startups or early-stage companies that have high growth potential.
Key characteristics of angel investors
- High-net-worth individuals: They typically have substantial personal wealth.
- Risk-tolerant: Just as many startups fail Angel investing involves high risk.
- Experienced entrepreneurs or business professionals: They often have industry knowledge and can provide mentorship.
- The desire for high returns: If the company succeeds it invests with the expectation of significant financial gain.
Benefits of angel investment for startups
- Access to capital: Provides crucial funding for early-stage growth.
- Mentorship and guidance: Offers valuable expertise and support.
- Validation: Attracting an angel investor can boost credibility and attract additional investors.
Crowdfunding
Your business ideas could be a mere dream without start-up capital and that’s where crowdfunding can come in as an effective avenue for you as an entrepreneur. It involves raising money from a large number of people who each contribute a relatively small amount, typically via the Internet.
With operations that provide relevant solutions to existing problems this fundraising approach is suitable for SMEs, such as social enterprises. By appealing to the solution-providing nature of their business small businesses can tap into this opportunity and successfully harness available resources from the general public. Although you have more leverage of success when you are a public figure or a social type.
YouWIN Connect Nigeria
To foster entrepreneurship, stimulate job growth, and drive economic prosperity among young Nigerians YouWIN Connect Nigeria came into play as a comprehensive multimedia initiative. The program empowers aspiring and existing entrepreneurs by delivering essential enterprise education with the knowledge and skills necessary to build successful businesses.
Expected Outcomes
- Increased number of young Nigerians engaged in entrepreneurial activities
- Creation of new jobs through SME growth
- Enhanced productivity and competitiveness of SMEs
- Diversification of the Nigerian economy
Requirements
To achieve its objectives, YouWIN Connect Nigeria will require the following:
- Strong Partnership: To leverage their expertise and resources in collaboration with government agencies, private sector organizations, academic institutions, and development partners.
- Financial Investment: To support program development, adequate funding implementation, and evaluation.
- Qualified Personnel: A team of experienced professionals with expertise in entrepreneurship, education, and program management.
- Effective Communication: To reach and engage the target audience robust communication strategy is very important.
- Technology Infrastructure: To deliver multimedia content and facilitate interactions reliable and accessible technology platform should be present.
- Monitoring and Evaluation: The impact of your business growth or failure is tracked using this comprehensive system that measures and makes necessary adjustments if you want to keep track of program progress it necessary.
Bank of Industry (BOI)
Nigeria’s largest and oldest development finance institution is known as the Bank of Industry (BOI). It aims to provide long-term funding to the Nigerian economy, particularly to small and medium-sized enterprises (SMEs). Starting from a minimum of 5 million Naira BOI offers various grants and loans.
Expected Outcomes
- SME Growth and Development: By providing access to finance, contributing to job creation, and increasing productivity BOI aims to foster the growth and development of SMEs.
- Industrialization: To enhance Nigeria’s manufacturing capacity and reduce reliance on imports supporting industrial projects through long-term financing.
- Infrastructure Development: Contributing to the development of critical infrastructure projects, such as power, transportation, and telecommunications, which are essential for economic growth.
- Regional Development: Promoting balanced economic growth across Nigeria by supporting businesses in different regions.
- Export Promotion: Supporting export-oriented businesses to increase foreign exchange earnings and reduce trade deficits.
Requirements:
- Nigerian citizenship
- A viable business idea within 40 identified clusters in Nigeria
- Age between 18 and 35
- Minimum educational qualification of OND
- Ability to apply online via BOI’s website
Tony Elumelu Foundation (TEF) Entrepreneurship Programme
Across Africa the TEF Entrepreneurship Programme champions African entrepreneurship by providing training, mentorship, and $5,000 in non-refundable startup capital only to few selected entrepreneurs .
Expected Outcomes
- Empowerment of African Entrepreneurs: Adding to every necessary skill and resources needed to start and grow their businesses it also provides training, mentorship, and seed capital to equip young entrepreneurs.
- Job Creation: Through the growth and expansion of TEF-supported businesses, it also stimulates job creation thereby contributing to economic development across Africa.
- Economic Growth: Catalyzing economic growth by supporting innovative and scalable businesses that have the potential to create wealth and generate employment opportunities.
- Poverty Reduction: Contributing to poverty alleviation by empowering individuals to become entrepreneurs and create sustainable livelihoods.
- Entrepreneurial Ecosystem Development: Building a vibrant entrepreneurial ecosystem by fostering a culture of innovation, risk-taking, and business creation.
- Pan-Africanism: Promoting regional integration and collaboration among African entrepreneurs through networking opportunities and knowledge sharing.
Requirements:
- Legal residency and business operations in any African country
- Business must be 3 years old or less
- Profitable business idea
- Application via TEFConnect
Lagos State Entrepreneurs Trust Fund (LSETF)
To all SMEs in Lagos State LSETF offers financial and business support to as many that will qualify. Through financial aid, the fund aims to help businesses grow, but it requires an online application and relevant documentation.
Expected Outcomes
- SME Growth and Development: Providing financial and business support to help SMEs expand, create jobs, and increase their revenue.
- Job Creation: Stimulating job creation through the growth and expansion of supported SMEs, contributing to employment opportunities in Lagos State.
- Economic Growth: Contributing to the overall economic growth of Lagos State by fostering a thriving SME sector.
- Innovation and Entrepreneurship: Encouraging innovation and entrepreneurship by supporting businesses with high growth potential.
- Improved Business Environment: Creating a more conducive business environment for SMEs to operate and thrive in Lagos State.
- Poverty Reduction: Contributing to poverty alleviation by supporting businesses that have the potential to lift people out of poverty.
Requirements
- Age 18 and above
- Businesses in sectors like healthcare, entertainment, hospitality, manufacturing, or construction
- Business must be based in Lagos State
- Application via LSETF website
GroFin Fund
GroFin provides financing and business support to SMEs in emerging markets. With a fund size of over $100 million, it supports Nigerian MSMEs with financing between $100,000 and $1,500,000.
Requirements
- Business located in GroFin’s operating countries
- Owner-operated and profitable business
- Application via GroFin website
Africa’s Young Entrepreneur Empowerment Nigeria (AYEEN)
With enough funding, mentorship, and training AYEEN empowers young Nigerian entrepreneurs to start up a business of their own. with Grants ranging from thousands to millions of Naira based on business ideas presented.
Requirements
- Age 18 and above
- Innovative business idea or existing business
- Nigerian citizenship and business operations within Nigeria
- Application via AYEEN website
Shell LiveWire
In the Niger Delta, Shell LiveWIRE supports young entrepreneurs with training, mentoring, networking, and funding opportunities.
Requirements
- Age 18 to 30
- Resident of a Niger Delta state
- Sustainable, innovative business idea
- Application via Shell Nigeria website
i-DICE Program
With a $672 million fund, the i-DICE program supports young entrepreneurs in Nigeria’s tech and creative sectors. It aims to foster innovation, increase employability, and bridge gender gaps in STEM and entrepreneurship.
Requirements
- Nigerian youth aged 15-35
- Business in tech or creative sectors
- Application via BOI website
Orange Corners Nigeria
Orange Corners, an initiative by the Kingdom of the Netherlands, offers a 6-month incubation program for young Nigerian entrepreneurs, providing skills development, coaching, and market access.
Requirements
- Young entrepreneurs with innovative business ideas
- Application via Orange Corners Nigeria website
Conclusion
My dear never allow your entrepreneurial dreams to go down the drain because of financial constraints. To secure the support you need to turn your business vision into reality try out these grant and funding opportunities we listed above.
Note: This guide is for informational purposes only. we are not affiliated with any of the partners listed. Visit the respective websites for application details. Good luck!
