CEM REPORT, FINANCE | The United Bank of Africa (UBA) and the African Continental Free Trade Area Secretariat (AfCFTA) have joined forces to provide funding for Small and Medium Enterprises (SMEs) in Africa’s transport and logistics, agro-processing, automotive, and pharmaceutical sectors.
The partnership, outlined in a $6 billion Memorandum of Understanding (MoU), is expected to provide funding for SMEs in these sectors, which will greatly contribute to the growth and development of the African continent.
This announcement was made by Babatunde Ajayi, the Head of SME Banking at UBA, during the Nigerian Canadian Business Association Business 2023 Roundtable held in Lagos. The event was themed “Enabling Growth by Unlocking Access to Capital, Technology, And Markets.”
During the panel session, Ajayi emphasized the importance of intra-African trade, which currently remains below 20 per cent in Africa. He noted that it is imperative that African countries work together to increase trade between themselves.
“I’m the one driving the newly signed $6bn in partnership with the AfCFTA to fund SMEs across Africa. We are focusing on four sectors – Agro-processing, Automotive, Pharmaceuticals, and Transport and Logistics.
“Across Africa, what we found are that these sectors have the highest potential for import substitution and those are the sectors we can easily make huge gains within Africa.”
This partnership between UBA and AfCFTA is a significant step towards achieving the goals of the African Continental Free Trade Area Agreement (AfCFTA). The agreement aims to create a single market for goods and services in Africa, with the goal of increasing intra-African trade and promoting economic growth and development across the continent.
By providing funding for SMEs in key sectors, UBA and AfCFTA are helping to unlock the potential of African businesses and contribute to the growth and development of the African continent.
Small and Medium Enterprises (SMEs) are an integral part of the Nigerian economy, contributing significantly to employment generation, economic growth, and development. However, despite their importance, SMEs in Nigeria face numerous challenges that impede their growth and sustainability. One of the most significant obstacles is access to finance. Many SMEs struggle to secure funding from banks and financial institutions due to stringent lending criteria and high interest rates. This lack of access to finance often leads to a vicious cycle of low productivity and limited growth potential.
Moreover, multiple taxation remains a significant challenge for SMEs in Nigeria. The tax system is complex, and SMEs often find it challenging to navigate the various taxes imposed by different levels of government. This leads to a high cost of compliance, which, coupled with the high cost of production, makes it difficult for SMEs to compete with imported products.
The high cost of production in Nigeria is another major challenge faced by SMEs. The cost of electricity, transportation, and raw materials is high, making it difficult for SMEs to produce goods at competitive prices. This makes it challenging for SMEs to penetrate the global market and limits their export potential.
To address these challenges, the Nigerian Canadian Business Association (NCBA) has identified three pillars of access to capital, technology, and markets that provide essential guidance for SMEs navigating the intricacies of the global economy.
The Chairperson of the NCBA, Ebi Obaro, emphasized the importance of technology in the future of business and how it holds a lot of potential for small and medium-sized enterprises. The goal is to explore the many ways in which technology can be harnessed to improve efficiency and productivity in businesses in both Nigeria and Canada.
[READ ALSO] COP28: President Suluhu Launches African Women Clean Cooking Support Programme
“Technology is drastically changing the future of business and holds a lot of potential for small and medium-sized enterprises. Our goal is to explore the many ways in which we can harness technology to improve efficiency and productivity in businesses in both Nigeria and Canada.”
The $6 billion funding provided by UBA and AfCFTA will be focused on four key sectors: Agro-processing, Automotive, Pharmaceuticals, and Transport and Logistics. These sectors have been identified as having the highest potential for import substitution, which means that African countries can easily make huge gains within Africa by investing in these sectors. By funding SMEs in these sectors, UBA and AfCFTA aim to unlock the potential of African businesses and help them grow and thrive.
SMEs are a crucial component of the Nigerian economy and require support to overcome the numerous challenges they face. Access to finance, multiple taxation, and high production costs are some of the significant obstacles that need to be addressed to promote the growth and sustainability of SMEs. The three pillars of access to capital, technology, and markets provide a roadmap for SMEs to navigate the complexities of the global economy and achieve their full potential.
