• Wednesday, May 29, 2024
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BusinessDay

Analysts hail Dubai’s dedicated stock market for SMEs, but say Nigeria not ripe

FMDQ, NASD, and NSE Lead Conference on SME Financing via the Capital Markets

Dubai has launched a new stock market, the Nasdaq Dubai Growth Market, for businesses that fall under the SME sub-sector, to help fast-growing companies to achieve a “cost-effective” listing and form part of the Dubai Future District project.

Analysts say this dedicated stock market for Small and Medium Enterprises (SMEs) is a good idea. Some add, however, that it is not yet needed in Nigeria.

“Good thinking,” Taiwo Oyedele, head of tax at PwC, tweeted, saying it will not be a bad idea to have a dedicated stock market for SMEs in Nigeria.
This, he said, would help finance growth and encourage small businesses to develop good corporate governance practices.

Read also: 5 things FG must do to turn Nigeria into industrial economy

In Nigeria, SMEs contribute about 76 percent of the workforce, with contribution to GDP at about 50 percent and contribution to exports at 8 percent.

The total number of SME establishments in Dubai is estimated at 151,875 and they have registered a 9 percent compounded annual growth rate (CAGR) since 2008 when the SME business count was estimated at 72,695. Micro firms account for 61 percent of the total business count in Dubai, followed by small and medium firms that account for 36 percent and 2 percent of the total number of enterprises in Dubai, respectively, according to Gulf News.

But Olalekan Aworinde, senior lecturer, Department of Economics, Pan-Atlantic University, Lagos, said the primary market and the secondary market in Nigeria are not fully developed and thus, there is no need for the stock market dedicated for the SMEs in Nigeria.
“As much as I believe that the SMEs can engender growth in Nigeria, they do not have the required capital to trade on the market. In addition, the number of SMEs in Nigeria is not known and I think the first thing to do is to have adequate data base for SMEs,” he said.

Aworinde said majority of the SMEs in Nigeria are enterprises and not limited liability companies and as such they do not have the requirements to trade on the floor of the Nigeria Stock Exchange (NSE).

To drive growth of the SMEs in Nigeria, he said there is the need to provide an enabling environment first, before being listed on the stock exchange.

“Thus, the idea is good, but not needed in Nigeria for now,” Aworinde told BusinessDay.