Banks, multinationals stifling growth of MSMEs, says NICA

The National Institute of Credit Administration (NICA) chartered, has expressed worries over the inadequate support that Micro, Small, and Medium Enterprises (MSMEs) receive from multinational corporations, financial institutions, and other key stakeholders in the Nigerian economy.

The institute in a statement seen by BusinessDay said despite key roles MSMEs play in driving economic growth, job creation, and national development, they continue to struggle with limited access to credit, unfavourable lending conditions, and insufficient financial backing from major players in the business and financial sectors.

“As Nigeria transitions towards a more credit-driven economy, the survival and expansion of MSMEs are increasingly dependent on the willingness of the government, financial institutions, and big corporate entities to create an enabling environment,” said Chris Onalo, registrar and CEO NICA.

”Banks’ long-standing reluctance to offer flexible loan options and stringent collateral requirements and multinational corporations and other big business conglomerates’ general apathy toward integrating MSMEs into their value chains have significantly stifled small businesses’ growth potential in Nigeria.

According to recent economic reports, MSMEs contribute over 50% of Nigeria’s Gross Domestic Product (GDP) and account for more than 80% of employment opportunities.

However, they continue to face significant challenges, including unfair treatment by larger businesses, limited access to structured credit, delayed invoice payments, and insufficient patronage from banks, multinational corporations, and large enterprises.

These obstacles hinder their ability to scale and compete effectively in both local and international markets.

Beyond credit access, financial institutions, multinational corporations, and other large conglomerates also fail to support MSMEs by patronising their businesses.

Rather than engaging MSMEs for procurement and service contracts, they prefer dealing with large corporations orthose owned by insiders in top management positions.

This practice deprives MSMEs of essential business opportunities and stifles competition in the economy. The federal government is advised to put legislation in place to check this trend.

A thriving MSME sector depends not only on credit availability and accessibility but also on business opportunities. When banks and multinationals overlook small businesses in their supply chains, they inadvertently contribute to the sector’s stagnation.

According to NICA, in cases where large corporations and financial institutions engage MSMEs, invoice settlement delays of 30, 60, or even 90 days are commonplace, an internal payment policy that appears detrimental to the growth of small businesses.

NICA stated that MSMEs rely on prompt settlements of their invoices to maintain cash flow and operational stability. Delayed settlements can lead to liquidity challenges, making it difficult for small businesses to meet other business obligations -reinvest in operations or pay salaries.

Large corporations often use this practice to manage their own cash flow while unintentionally creating financial strain on smaller suppliers.

For MSMEs, these delayed settlements of business invoices can result in: cash flow disruptions, increased borrowing costs and business instability, according to Onalo.

“MSMEs fuel the banking sector through deposits and cash flows, payment and transactions, and other services. It is only fair that banks, in turn, support MSMEs by offering reciprocal business opportunities and timely settlements.”

To foster a more inclusive economic and financial ecosystem, NICA recommends: equitable procurement practices, prompt invoice settlement policy, stronger advocacy, antitrust Law legislation enforcement among others.