Emmanuel Addeh in Abuja
Black-owned and led businesses in Nigeria face a funding gap estimated at $131 billion, the largest among five African countries examined in a new report by British International Investment (BII), the United Kingdom’s development finance institution, and Swedfund, Sweden’s development finance institution.
The report: “Understanding the Investment Gaps in Black-owned and -Led Businesses in sub-Saharan Africa,” put the combined financing shortfall across Nigeria, South Africa, Kenya, Senegal and Côte d’Ivoire at $209 billion, highlighting the difficulty many businesses face in securing the capital needed to expand operations and create jobs.
South Africa accounted for the second-largest gap at $45 billion, followed by Kenya with $23 billion, Senegal with $5.7 billion and Côte d’Ivoire with $4.6 billion.
The study combined quantitative market analysis with consultations involving stakeholders to examine the representation of Black-owned and -led businesses, their financing needs and the barriers limiting their access to capital.
It also estimated the financing gap for such businesses across sub-Saharan Africa at $1.842 trillion, about four times the gap for businesses outside the category.
According to the report, Black-owned and -led businesses account for between 89 and 99 per cent of small businesses across the five markets. However, their representation declined as companies grew, accounting for only 40 per cent of larger businesses in Kenya and 35 per cent in South Africa.
The report said the figures highlighted the difficulties these businesses face in scaling up, particularly as larger companies generally have access to greater volumes of financing.
It identified food systems, trade, services, light manufacturing and agriculture as the sectors where Black-owned and -led businesses are concentrated, reflecting strong local participation and relatively low barriers to entry.
However, businesses seeking to expand into capital-intensive sectors such as infrastructure, energy and financial services often face higher funding requirements and demands for specialised expertise, making it more difficult to move beyond the small and medium-sized enterprise stage.
The study identified investment readiness, limited access to suitable financing, talent shortages and inadequate business networks as some of the constraints facing the companies.
Investors, on the other hand, often contend with limited local representation, insufficient understanding of local markets, perceptions of risk and financing structures that do not adequately reflect businesses’ needs.