Four hurdles in path of impact investing in Nigeria

The growth and development of Impact investing in Nigeria is faced with four distinct hurdles from bridging the gap of product availability to policy/regulation, awareness and capacity building for small enterprises, a new report by the Nigerian National Advisory Board for Impact Investment has shown.

Titled ‘Investing for Impact in Nigeria: A Deep Dive into Agriculture, Education and Health Sectors,’ the report revealed that Nigeria needs a new approach to closing the gaps in impact investing.

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Under product availability, the report revealed that there is a lack of wholesale impact funds, limited long-term intervention funds by government and private/donor programmes and scarcity of investable social enterprises or projects.

“We have weak regulations and incentives for impact investing products or funds and absence of a National Impact Investing Framework for the private sector and investors,” the report noted.

“There should be integration of corporate social responsibility components in investment and asset deployment.”

In addition, the report revealed that there is a lack of awareness of the importance of Impact Investing products and work needs to be done to turn it around.

“Also, MSMEs’ capacity building tends not to be a key focus area in intervention funds and investments by the private sector,” the report revealed.

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Offering solutions to bridging these gaps, the report said that there should be a framework that would help to engender effective and focused policies and initiatives towards addressing issues around the Impact Investing market approaches that have not worked.

“In addition, the framework will help to develop ways to close the observed gaps highlighted in the previous section. The policy mainstreaming framework suggested entails three critical components-supply development, re-directing capital and demand development.”

According to the report, the policy framework approach contextualises the daunting challenges affecting Nigeria’s market. “These challenges cut across all components of the market.”

“The supply development entails regulations to be developed by the government towards easing the current barriers and enabling impact investing products to meet the development priorities in Nigeria,” the report noted.

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An action plan by the United Nations Development Programme (UNDP) showed that private flows have not been sufficiently deployed in the provision of products and services to address Africa’s development challenges.

“Therefore, even with an increase in available private capital, the lack of investment in key areas and sectors, coupled with a general decline in traditional official development assistance, means that African governments will need to continue to diversify sources of funding to be able to finance the achievement of the AU’s Agenda 2063 and the SDGs.”

“In spite of this promise, impact investment in Africa has not realised its potential largely due to an under-developed impact investment support ecosystem,” the UNDP said.