Experts from key sectors of the economy have thrown their weight behind factoring as a credible alternative window to conventional bank credit in Nigeria.
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable to a third party at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.
Speaking during a webinar organised by Factoring and Supply Chain Finance, a subsidiary of PanAfrican Capital Holdings in partnership with Power gas, on the topic: Factoring: An Alternative Window to Conventional Bank Credit; Yomi Arogundade, deputy director, OFISD, CBN said Small and Medium Enterprises, (SMEs) play important roles in economic development and better access to finance will help sustain these SMEs.
Arogundade further explained that over 90 percent of businesses in Nigeria are SMEs and SMEs contribute about 48percent to Gross Domestic Product (GDP).
Read also: Afreximbank announces opening of 2021 Certificate of Finance in International Trade Programme
Andrew Nevin, Advisory Partner & Chief Economist, PWC said there is no better time to finance SMEs than now and factoring is a better funding platform as it gives a good rate of returns to investors, he said in factoring, there are fewer paper works and access fund is much easier.
Also speaking at the webinar, Akeem Oladitan, CEO Power gas Nigeria explained that it takes up to 30 days or more to get payments from customers, so they resort to factoring and discounting of their invoices.
For Valentine Obi, group CEO, E-Tranzact Global, he alluded to the fact that technology is key for factoring and supply chain financing in Nigeria.
“Technology is an enabler. It enables you to do your business in an easy way. If you don’t have a proper technology platform and you try to do factoring manually, it would be a huge challenge,” Obi said.
Peter Mulroy, secretary-general, Factors Chain International, (FCI) and the lead speaker at the webinar said the focus will be placed on the development of a credit/payment repository in the New Year as a means of stimulating credit insurance for factoring businesses in Nigeria.
Mulroy assured that there are huge opportunities for factoring in Africa especially with the African Continental Free Trade Area, (AfCFTA), adding that it is the main post COVID recovery strategy for Africa and Intra-Africa trade that will help Africa get back on track.
Lanre Bakare, managing director, F & SCF Limited who was also a panelist, said the Nigerian Factoring Bill if passed into law will address the liquidity challenges faced by SMEs.
He said considering how critical SMEs are, they need to be given access to finance; sadly, the regular finances are not forthcoming.
