With Nigeria’s inflation rate sliding to eight per cent amid falling oil prices, fears are rife among financial experts that the sinking oil prices could affect some nation’s economies in more ways than one. Speaking with the duo of Ntia Usukuma and Lawrence Amaku, the Deputy General Manager, Divisional Head, SMEs, Fidelity Bank Plc, Ken Opara, opines that this dark era for oil markets has baked a huge economic pie for SMEs in Nigeria.
High mortality rate among SMEs in Nigeria
The critical reason that affects SMEs in Nigeria, and by extension their mortality rate, has to do with how SMEs are structured. This is the essence of Fidelity Bank getting involved in helping SMEs to put proper structures in place. Lack of proper record keeping; poor corporate governance, key man risks among other problems are essentially responsible for the high mortality rate of SMEs in Nigeria.
Fidelity Bank’s intervention in ensuring that the SME sector remains functional
It is important to recognise that the approach of Fidelity Bank is very unique. We go beyond providing funding to building capacity, providing advisory services and access to markets which is what most SMEs really need. This enables them to grow their businesses and take it to the next level. Fidelity Bank takes a long term business approach with the SMEs
Fidelity Bank’s benefit from all of this
Our mantra is that we are empowering Nigerian entrepreneurs with knowledge and wisdom. It is not that we are going to own equity in their businesses. The total number of SMEs in Nigeria is over 17 million. Through our various initiatives and intervention programmes starting with 
advisory services, business management capacity building programme on radio, conferences, seminars, workshops, enterprise development programmes and others, we help SMEs to grow their businesses by proving them with business management wisdom and resources required to win in the marketplace. People see us as SME friendly Bank. Having helped to empower these SMEs, most of them are now empowered to grow beyond the high mortality rate that is associated with SMEs. These SMEs in turn recognise us as partners in this growth and development process and naturally reciprocate by doing business with us. Various institutions within the SME space have bestowed several awards on Fidelity Bank. Some of them range from the best, most supportive to most innovative SME bank in Nigeria. For us, we believe that this would translate to increased business for the bank.
Fidelity Bank’s assistance of SMEs to translate ideas to sustainable business
First, we have a number of eligibility criteria which we have created to enable us to profile prospective SME clients. For SMEs, the first point is that they go to our website to sign up for advisory and to complete the eligibility assessment form which helps to capture information about what they want to do. As soon as we get the information, we go into the process of hand-holding and advisory. The bank does not automatically become the consultant. We have partners that are SME-friendly. Among these partners are auditors and accountants, who help to prepare accounting records for SMEs. When there is need for keeping proper records, we go through our partners to do that. Similarly, we help those who are in need of IT solution. This would enable SMEs to properly structure their businesses. We also have partners that specialize in other SME resource solutions. We also have what we call SME marketplace. This is essentially about how to get SMEs into the marketplace. This will enable then to host their products and services online so that they don’t need to have physical presence in all locations. Taking them to the next level means that apart from providing them with business know-how and market access. We also provide them with tailor-made funding. We do this through cluster lending to enable us tailor and situate the products to the needs of SMEs in same business ecosystem. We have done that in some locations. We have provided credit facilities for the Aba Shoes and Leather Goods Cluster; we have made available short-term credit support programmes to them. We are also playing strongly in the CBN’s N220 billion SME fund. Our MD/CEO is a member of the advisory council of that fund. Hence, we provide them with access to funding and market access to the marketplace through our various products, solutions and platforms.
Provisions set by Fidelity Bank for registration
The population of SMEs in Nigeria is about 17.5 million. Out of that, almost 17 million is in the micro segment. So, it will be difficult for Fidelity to have a one-on-one engagement and advisory services with almost 18 million SMEs. What we do is that, we have some eligibility criteria that help to profile and determine who we have one-on-one engagements with. On the other hand, we have products and services that support all the other segments of the SME sector that do not meet our eligibility criteria. For the small and medium enterprises that have put in some basic level of structure, we provide them with one-on-one business advisory service for them. But For the other smaller ones who are mostly at the micro level, we have developed products for them which they can access at any of our branches. One of such is the “Fidelity Small Business Account.” The account does not attract “COT” or any other charges. We call it free banking. The essence of this is that SMEs have very thin profit margins and therefore, are sensitive to costs. We have professionals in the management of SMEs who will help take them through the formative stages and fast-track their growth. As they begin to get some level of structure, we will then migrate them to the advisory platform.
Fidelity dealing with SMEs that cannot produce collateral
Most SMEs die off within three years of their existence. This means that, there are other fundamental problems beyond funding. I want to reemphasize that development of business management capacity will put them in a position of strength and capacity to grow their businesses. We take a critical look at the businesses to determine what type of funding that will suit them. There are those that require basic funding; some people who don’t need collateral take as little as N100, 000. However, they need to go through the discipline of being an entrepreneur which begins from separating the affairs of the business from that of the promoter. When you have this orientation, we can give you money which will also be determined by your capacity. For instance, if your borrowing capacity is N100, 000, we will give you a funding of N100, 000. One of such products is the commercial support overdraft which is unsecured. Even if we say that it is collateral-free, the default risk of the scheme is mitigated by the structures we put in place. Our structure of helping them to build financial capacity can be tailored appropriately without asking for collateral. We have to be sure that people are not just taking this money because they want to have access to money. We have zero collaterized loans but we build in proper structures to mitigate default risk. However, as they grow and the volume of financing needs expand, we can then demand request for some other kinds of collaterals.
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Advice for SMEs in Nigeria and the challenges they may face in view of the global crash of oil
The first point to recognize is to understand that what has happened in the new economic policy and outlook has presented tremendous opportunities for SMEs. With the depreciation of the naira vis-à-vis the American dollar and other foreign currencies, imported products will become more expensive, because for every dollar you now have to bring more volume of naira to purchase foreign products. When these goods come into the country, the prices would reflect this change, thereby making these goods more expensive. The implication is that the period presents a significant opportunity for those SMEs that are involved in manufacturing of local goods. What it now means is that their products will be cheaper and more competitive. Clearly, this era presents a tremendous opportunity for SMEs. We should not forget that we are also getting it right in the power sector, because it is a major infrastructure that affects local manufacturers of goods. This means that their reliance on generator will be reduced. For those people that are involved in manufacturing and local production, this is an opportunity they can cash in on. The oil price is on a free-fall and the value of the naira is depreciating. For SMEs in the fast moving consumer goods sector and manufacturing, this is an opportunity for them to significantly grow the business. The outlook is beckoning on SMEs to seize the moment.
Impact of the fall in global oil price on government support for SMEs in Nigeria
N220 billion has already been dedicated for the SME development scheme. The money allocated by government is meant for SMEs and the productive sector which produces competitive goods; that will be demanded by consumers. That also provides liquidity for them. Banks are also looking towards areas that are not clouded with a lot of unmitigated risks. The major issue is the business opportunity and profit. If the bank sees it from that perspective, they would be able to support SMEs. Unlike most luxury and non-consumer based products, SMEs have a huge possibility of expanding their market opportunities. Apart from CBN, various institutions like Fidelity Bank, Bank of Industry are available to provide solutions to the challenges of SMEs. Fidelity model is aimed at addressing the needs of the SMEs as well as de-risking the sector.
