Economy
Nigeria Poultry Sector Worth N1.2tr—Farmer
By Dipo Olowookere
Coordinator of the natnuPreneur Broiler Outgrower Scheme by natnudO Foods, Mr Gbolade Adewole, has put the value of the Nigerian poultry industry at over N1.2 trillion.
Mr Gbolade, during a media chat with Business Post, disclosed that the Nigerian poultry industry has the capacity to generate more than N1.2 trillion in revenue if fully exploited.
“It is important to state that the opportunities in the broiler market are substantial and all we need to do is to take a closer look at the value chain. Take for example, the Feed Mills. If we are allowed to produce the 1.5 million tons of chickens consumed locally, the feed mills will have to supply about N700 billion worth of feed, the hatchery N145billion worth of Day Old Chicks (DOCs) and the animal pharmaceutical industry will have to deliver drugs and vaccines worth about N45 – N55 billion.
“Those numbers that I have given you put together is about N900 billion and that is just on the input side of the business but 70 percent of that money is not allowed to be made in our system because of the imported chickens blocking the flow.
“Ideally, Nigeria has enough poultry farmers who are ready to breed broilers because they have the space and the farm but because of this constraint, nobody is willing to fully exploit that market.
“From available statistics, Nigeria consumes about 1.5 million tons of chicken annually but Nigeria produces only 30 percent of that. It is not that we do not have the capacity to produce 100 percent of what we consume, it is just that 70 percent of the chickens that we consume are imported (smuggled).
“Some people call them ‘cadaver’ chickens because of the long and poor storage process that they must go through before they get into the country. This is basically one of the biggest challenges confronting the broiler market in Nigeria. So, from an economic perspective, it’s affecting all the stakeholders in the value chain, namely: farmers, farm workers, transporters, input suppliers (feed, DOC), laboratories, extension officers, veterinary doctors, financial service providers, processing plants etc.”
Analyzing further, Mr Gbolade said “1.5 million metric tons of chicken is 1.5 billion kilograms of chicken. The average breast chicken is 1.4 kg so that gives us 1, 071,428,000. That is the amount of chicken that we consume every year. Give or take, plus or minus 25 percent that depends on whose statistics you are looking at.
“So, revenue on input alone will be about N900 billion if we were producing 100 percent of what we consume, since we are producing 30 percent of N900 billion that means we are losing N600 billion that cannot be done here.
“For example, people are opening feed-mills all over Nigeria which has brought about competitiveness among market forces, which is good for the farmers.
“However, it also means that some people will be knocked out of the feed market despite all the investments they have made. The ripple effect is what is more dangerous like job loss.
“Let us do some ballpark numbers together, stay with me on this, 1.5 million metric tons of chicken is 1.5 billion kilograms of chicken, the average dressed chicken weighs 1.4 kg so that gives us 1,071,428,000 birds consumed annually. That is the amount of chicken that we consume every year. Give or take, plus or minus 20 percent – 25 percent, depending on whose statistics you are looking at.
“So, revenue to input suppliers alone will be about N900 billion if we were producing 100 percent of what we consume. Since we are producing 30 percent of N900 billion, that means we are losing N600 billion just on the input side of the business alone.
“The Feed side of the business has become highly competitive which is good for the farmers on the short to medium term.
“However, it also means that some firms will be knocked out of the feed market despite all the investments they have made. The ripple effect is what is more dangerous, like heavy job losses along every point of the value chain.
“If Nigerian farmers are allowed to produce what we consume (1.5 million tons of chicken) this will translate into a lot of job opportunities. For instance, we should have well over 1 million attendants working on different farms.
“That is what we meant when we said across the value chain, our natnuPreneur scheme alone has the capacity to employ well over 2 million people. if we are to produce approximately, 1,071,428,000 chickens, you can imagine the number of people that we will need to produce them – the number of people we will need at the hatcheries, the feed-mills, in logistics, laboratories, extension officers, veterinary doctors etc., can only be imagined.
“In terms of revenue, how many farmers do we need to rear 1.5 million metric tons of chicken? if we assume, for argument’s sake, that an average capacity farm supplies twenty thousand birds every circle which is about 100,000 birds a year at 5 cycles per annum, if you divide 1,071,428,000 birds by a 100,000 that is approximately 11,000 broiler farms.
“These numbers are taken from a pessimistic perspective, since we know that the average Nigerian broiler farmer based on our scheme does about 5000 birds per cycle, approximately 25,000 birds per annum.
“On inputs alone, I easily calculated N900 billion. Take another example – transportation – movement of Day old Chicks, Feed, and Live birds back to the processing plants. The average cost of transportation in a cycle is 6.85 percent of the total cost of production, if we add the other nodes in the value chain, in terms of percentage, we get a revenue of about N1.3 trillion swirling around in this value chain.
“But, alas, we are doing only 30% of this. Thus, the revenue we are generating for the players in this broiler sub segment of the poultry business is only about N430 billion which is still miniscule compared to what we can do as a country. This is where we have a problem,” he said.
While highlighting the efforts of natnuPreneur in bridging the gap in the Nigerian chicken market, Mr Gbolade said, “We have reached out to the Consumer Protection Council and some members of the House of Representatives. The Group Managing Director of Amo Group, Dr Ayoola Oduntan, has also served on a Senate subcommittee on this smuggling issue.
“So, what we have done is provide government with as much information as possible because they are concerned about what is happening. We are also working with the CBN and NIRSAL on the Anchor Borrowers Programme (ABP) to help increase local production as much as we can.
Speaking further, Mr Gbolade said, “I will like to begin with the interesting hypothesis that says that smuggling of chicken has been banned.
“The goal is to focus, as we have done, at AMO Farms, through the NatnuPreneur scheme, on farmer profitability. As long as we can work out how the average broiler farmer can make and increase his profit, year by year, then we can be sure that the production will grow to fill this 70 percent gap created by the importation of ‘cadaver chickens’.
“The core focus on farmer profitability is the main building block of the natnuPreneur scheme. Based on the research we undertook at inception, we discovered that a substantial number of broiler operations of various sizes around the country had failed. So, it was in a bid to unravel and solve the causes of these farm failures that we designed our system.
“Firstly, even if they had everything working for them, the market wasn’t there for them to sell into in bulk at the time, problem solved by our guaranteed off taking, we are not talking about rearing 5-10 chickens to sell during festive season.
“Rather, we are talking about rearing 10,000-20,000 chickens and not having a ready market to sell it to. Secondly, the quality of inputs fluctuates depending on the source, thereby harming the final result for the farmers, problem solved, we provide high quality inputs that has been tested through over 10,000 cycles.
“Apart from the very good farms such as Amo Group and a few other notable companies who mill for their farms, farmers often get bad inputs. The practice of getting maize from different places and mixing them up generally reduces the quality and results in all kinds of lapses.
“Thirdly, management practices were a major point of failure, many of them had no training on the basics of broiler management, most especially bio-security.
“Funding was also one of the issues, problem solved, we provide extension officers that visit these farms weekly to monitor and train and advise the farmers, each cluster of extension officers is headed by a veterinary doctor.
“So, based on these findings, we now tried to design a system to resolve these challenges. It is this system that we designed to help that we adjust everyday as we move along. So, we need more companies to do what Amo Group is doing with the natnuPreneur scheme.
“One of the major discoveries that has turned out to be our driving force is that the smallest unit in the whole value chain is the farmer and the farmer must be profitable for the scheme to be successful.
“So, when we did all that designing, experimenting, training extension officers, process optimization etc., we realized that farmer profitability was the key. To ensure that this happens consistently, we focused on getting our trained extension officers to enlighten them on the reasons why their farms should not fail and how they can ensure they make profit consistently.
“We introduced our farmers to ‘NUMBERS’, We developed our economics of production template as a guide for them. We also developed a buy back price equation to enable the farmers have a clear idea of the purchase price to expect at the end of the cycle.
“We also provided a farm management process and helped them monitor their progress with tables and charts, such that farmers that used to make 2 percent profit and thought they were making money started making more money and increased their capacity, we always say we expect our farmers to make between, 7.5 -15 percent profit per cycle, and some even perform better. So, if we have more companies doing these things, we will solve this problem.
“Farmers have given us feedbacks on how they have increased their capacity following our template and systems. It is important to note that, after the delivery, we usually write what we call a post evaluation report to show the high capacity farmers how well they performed in the cycle and where they need to do better to make more profit.
“Lastly, we also learn from the farmers through the feedback we receive and use this to consciously improve the process, and I must say, while its not perfect yet, we have come a long way via a steep learning curve on both sides of the equation.
“What we are saying, in other words, is that we need more AMO FARM type operations in the country to bridge the gap.
“As clearly stated for this Scheme; ‘developing passionate and knowledgeable farmers towards sustained profitability’, emphasis on sustained profitability.”
When asked what has made the natnuPreneur scheme successful so far, Mr Gbolade said, “While they were carrying out the Anchor Borrowers Scheme for rice, they recorded some successes. They didn’t commence that of poultry until last year and we were the first anchor team for poultry with the CBN.
“What they have done is extensive because we rolled out at two poultry estates in Lagos state, as pilots and now we are about to embark on the rollout of a list of over 1000 broiler farmers who are prepared to join the scheme across all geo-political zones outside the north-east. Thus, CBN is doing a lot for poultry just like they are doing for rice.
“There are about 1000 farmers who are prepared to breed a minimum of about 2000 birds each which will give 1.96 million birds per cycle and they are ready because the funds are available. The farmers have gathered themselves together and they are running it through both CBN and NIRSAL.
“Apart from our own team, NIRSAL have also appointed project management teams across the whole country. The programme has been very successful and profitability has been very reasonable for our farmers. Another thing we need to address is that some of these farmers are just getting on board after many years of abandoning their farms so it’s taking them time to understand best practices.
“The CBN approached us because of the success we have recorded with the natnuPreneur programme and so far, the Anchor Borrowers Programme (ABP) with natnuPreneur scheme has been very successful.”
Responding to the question of the possibility of fraud on the scheme, the natnuPreneur coordinator said, “Everybody comes to the programme with a different model but I will tell you why our system works. In our model, we are the anchor, the suppliers, the monitoring team and the off-takers- it is end to end with us.
“The way CBN runs this ABP for broiler production is that they pay us (AMO) for input directly, we supply and monitor and then we pay back into the farmers’ accounts after off-taking. In this model, farmers can only access their profit. Thus, the chances of what transpired in the rice sector to occur here is close to zero.”
Revealing their projections for the country and natnuPreneur scheme, Mr Gbolade said, “The projection for the future for the country is that from January next year, Nigeria will consume 1,071,000,000 chicken pieces and for us at Amo Group, we will like to produce a good chunk of the one billion locally consumed chickens in the country in the long run. We believe that the production of 50 million broiler chickens is not out of our reach.”
On the challenge of Avain Influenza in poultry farming, MrGbolade said, “Firstly, Amo Farms have never experienced avian influenza and that is because of the effective bio-security system that we have in place.
“I am also not in a position to discuss this thoroughly, as I am not a veterinary doctor neither am I an animal scientist?
“My background is in Chemical Engineering and Project Management, with basic understanding of business processes and system optimization.
“That being said, let me state here that we cannot stop the disease from occurring because it is a bird migration related issue. However, what farmers can do is have very sound bio-security practices. Once that is done, the chances of the disease occurring on their farm will be minimal.
“What we do in natnuPreneur is that we try to replicate what we have in Amo Farms in each one of our natnuPreneur farms.
“Therefore, if you visit any natnuPreneur farm, what you will notice is strict adherence to bio-security. This is to ensure that the chances of Avian-Influenza or any other disease getting into the farms are reduced to the minimum.
“Another reason why we do this is because we don’t want unhealthy broilers. We only accept healthy chickens that are produced in healthy environments for processing at our abattoirs. We are very particular about quality and we don’t compromise the standard of the natnudO brand of chickens that we sell. Again, we also want to ensure that our farmers do not lose money. Like I said earlier, farmer profitability is very important to us at natnuPreneur.”
Mr Gbolade, while highlighting some of the challenge faced by the natnuPreneur scheme, stated that, “Our farmers’ state of happiness ranges from between reasonably happy to ecstatic.
“It’s not a perfect system yet. Hence, as expected, there will be hiccups from time to time as we learn more about the farmers and general operating environment.
“A case in point is the smuggled chickens’ saga currently creating a glut in the market. We have been a bit slack in keeping with our five working days post-delivery payment agreement due to slow sales.
“This we have started working upon by recalibrating our system to adjust to the market forces and we should be back on track with reasonable adjustment to our agreements by January 2018. I must say that our relative success has been part of our problems.
“We don’t want to be flouting agreements with our farmers because it is very dangerous for our reputation and bad for their farm’s profitability. Hence, we would rather not take on new farmers until we are ready.
“All these boil down to the same thing we have been harping on about and which seems to be the recurrent theme which is smuggling. If our output in terms of sales is moving as fast as we want, then it will be easy to take all these farmers on. Some of our farmers are very unhappy now because we have refused to give them birds because we cannot afford to delay their payment due to slow sales after they deliver.
“Furthermore, some of our farmers used to have issues of buy back pricing, but because we developed what we call a ‘buy-back price equation,’ the process is now transparent enough to them that they can put in the variables into the equation and the buy-back price will be computed automatically.
“In addition, I will like to state that we are constantly in a ‘work in progress’ mode. We are doing our best to improve the process everyday but everybody cannot be satisfied at the same time.
“In the middle of the decision making, when we suddenly decided to cut short the journey, some people became upset, but on our part, we didn’t want to flout the agreement we had with the farmers. When a farmer cannot get back his money on time, what it means is that he will not be able to restock as and when due.
“The reasonable time between delivery of mature broilers and restocking to the next circle is two weeks. Within those two weeks, the farmer needs his money to arrange and stock for the next round.
“For farmers who are funded by commercial institutions, if their payment is delayed, it becomes bad.
“So, these are some of the things we are trying to work on. We are improving and as I said earlier, our system is not perfect yet, but I’m yet to see a system that is as good as the one that we have so far. We are not boasting but the facts are all verifiable with real farmers on the field” he said.
“Apart from natnuPreneur Broiler Outgrower Scheme, there is another natnuPreneur scheme called “natnuPreneur Seller.”
According to him, “For natnuPreneur seller scheme, we noticed that we are okay on the supply side, at least for now. Currently, if we want to do 50,000 chickens daily, there are farms to do it, there are processing plants to process it and there are storage rooms to keep them.
“Now we have designed what we call natnuPreneur seller which is to provide an opportunity for the neighbourhood sellers who have freezers and generators to sell NatnudO chicken products and make profit. Using the same piloting model and testing, we have designed and tested our system over the past 7 months and we are ready to launch.
“Presently, we have a woman who started just over a month ago with a sale of 200kg/week but now she buys close to 500kg/ week to resell, in her neighbourhood. With an average of N100/ kg profit, she is laughing all the way to the bank.
“Also, we have a seller in Ekpoma who started with just 3 bags of chicken and 1 bag of gizzard. Now, he is ordering 1 ton every two weeks. He has also expanded his business outside Ekpoma to Irua and will be opening a new branch in Auchi by January next year.
“In Benin City, we just launched a seller called “Just Protein” who sells between 4-5 tons every month.
“In short, what we are trying to do is make sure that at the end of the value chain, the people selling also find the business profitable, making 15- 20% profit per kg.
“With the experiment cum pilot completed, we are confident that the natnuPreneur seller scheme will also record successes similar to those achieved with the farming side of the business, thereby completing our loop.
“We are trying our best at AMO to make our natnudO brand of protein products available to Nigerians. However, if there are smuggled chickens in our markets, it will be difficult for our products to sell well especially to those who are not literate enough to understand the dangers of eating imported smuggled chickens.”
By Modupe Gbadeyanka
The planned implementation of the new tax laws from Thursday, January 1, 2026, will not be reversed, the federal government has emphasised.
This emphasis was made amid controversies over discrepancies in the harmonised and gazetted copies of the laws.
A lawmaker in the House of Representatives, Mr Abdussamad Dasuki, raised this alarm last week during plenary.
He said parts of the laws passed by the National Assembly were different from the gazetted, calling on the leadership to look into this.
In June 2025, President Bola Tinubu signed the four tax-related bills in law as part of his government’s reform programme
The new tax laws are the Nigeria Revenue Service (Establishment) Act, the Joint Revenue Board of Nigeria (Establishment) Act, the Nigeria Tax Act, and the Nigeria Tax Administration Act.
Addressing newsmen after a meeting with Mr Tinubu in Lagos on Friday, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele, stressed there were no plans to suspend the implementation of the laws from next Thursday, despite calls for this.
However, he welcomed the decision of the House of Representatives to investigate the matter, stressing that the federal government is ready to work with the National Assembly if any action becomes necessary, but maintained that the reform timeline remains unchanged.
Mr Oyedele explained that the reforms are aimed at providing relief to Nigerians and stimulating economic growth rather than generating immediate revenue, noting about 98 per cent of workers would either pay no personal income tax or pay less, while 97 per cent of small businesses would be exempted from corporate income tax and VAT withholding tax.
He added that large businesses would also benefit from lower effective tax rates, noting that the reforms are designed to promote inclusivity, shared prosperity and improved tax compliance.
The tax expert said preparations for the reforms began in October 2024 when the bills were first submitted to the National Assembly and have continued through capacity building, system upgrades and stakeholder sensitisation since the laws were signed in June 2025.
By Adedapo Adesanya
The oil market depreciated by more than 2 per cent on Friday as investors weighed a looming global supply glut, while also keeping an eye on a potential Ukraine peace deal.
Brent crude futures lost $1.60 or 2.57 per cent to trade at $60.64 per barrel and the US West Texas Intermediate (WTI) crude futures crumbled by $1.61 or 2.76 per cent to $56.74 a barrel.
The global oil supply next year will exceed demand by 3.84 million barrels per day, according to figures from the International Energy Administration (IEA) in its December oil market report.
Supply rose sharply this year boosted by output hikes from the Organization of the Petroleum Exporting Countries and allies (OPEC+) as well as growth in the United States and other producers. The group also paused output increases for the first quarter of 2026.
Meanwhile, OPEC kept its global demand growth forecast for year next unchanged in its monthly report, with its data indicating that world oil supply will match demand closely in 2026, in contrast to the IEA’s view.
While supply disruptions have helped oil prices rebound in recent sessions from their near five-year low, they are on track for their steepest annual decline since 2020. Brent and WTI are down 19 per cent and 21 per cent respectively on the year, as rising crude output caused concerns of an oil glut heading into next year.
Investors are watching for developments in the Russia-Ukraine peace process ahead of talks this weekend between Ukrainian President Volodymyr Zelenskiy and US President Donald Trump.
They will be focusing on the possible impact on future oil prices as a peace agreement could lead to the removal of international sanctions against Russia’s oil sector.
The Ukrainian president has said he would be willing to call a referendum on an agreed peace framework if Russia agrees to a ceasefire.
In Venezuela, the White House ordered the US military forces to focus on a “quarantine” of Venezuelan oil for at least the next two months, indicating the Trump administration is currently more interested in using economic rather than military means to pressure the South American OPEC member.
During the week, the American Petroleum Institute (API) estimated that crude oil inventories in the United States saw a build of 2.4 million barrels in the week ending December 19. Crude oil inventories data from the Energy Information Administration (EIA) will be released next week due to the Christmas holidays.
Finance may be the single most essential element when it comes to the progress and sustainability of businesses in Nigeria. The level of funding available to businesses, small and big, determines their ability to function, grow, and compete. The Nigerian business environment, due to the interplay between the local economy, financial institutions, government, and private investors, offers multiple financing opportunities. The dynamics of these financing opportunities helps business owners and managers make the right decisions that best respond to their objectives and the level of risk they are willing to take.
Start your Livescorebet registration and discover more as this article analyzes the different sources of business finance in Nigeria in a systematic and detailed manner. It defines and explains internal and external financing options and the criteria relevant businesses may use in their search for the best financing instrument.
Understanding Sources of Business Finance
Before one can delve into the different options of business financing available, it is important to define business finances and categorize it. The objective of this is to establish a foundation for understanding the extent to which some options may be more appropriate for different businesses than others.
What Are Sources of Finance?
Sources of finance are how a business acquires funds to begin activities, settle daily operations, or pay for additional business activities like acquisitions, expansions, and long-term projects. Businesses may need to finance the purchase of new equipment, hire and pay additional staff, manage business cash flow, develop new products, or finance the expenses required to enter or compete in new markets.
In Nigeria, the Sources of finance are determined by interest rates, availability of bank services, regulations, and the growth stage of capital markets, among other things. A business may use its own cash resources, borrow from a financial institution, receive funds from an investor, or receive a government grant or other government-funded assistance program. Each of these also offers different-related costs, obligations, and levels of control.
Types of Finance: Major Categories
Business finance is typically subdivided into two larger subsets: internal finance, and external finance. Internal finance is from the business and its resources; external finance is from third parties.
The classification of finance by time is also an option. Short-term finance is used for the working capital needs like inventory and operational expenses. Medium-term finance is used for the purchase of an asset like a machine. Long-term finance is used for significant investments like expansion or infrastructure. These classifications often overlap with internal and external sources and help a business structure their financing efficiently.
Key Principles and Examples
Cost is the most influential principle when it comes to the choice and method of utilizing finance. Aspects like interest and dividends affect profitability. Additionally, other opportunity costs must also be focused on. Another principle is risk. Increased borrowing equates to an increase in financial obligations. Control and flexibility are also essential, especially in terms of the original decision makers.
For instance, a small retail shop could potentially rely on the profits previously obtained to purchase stock and restock their shelf. On the other hand, a manufacturing business may need to obtain a bank loan in addition to leasing an arrangement in order to get the needed equipment. These principles must be understood so that finance can be used to support the objectives of the company.
Internal Sources of Business Finance
Internal sources of finance are the finance obtained within a business without the need of external lenders or investors. These sources are often preferred as with them, the business relies a minimal amount on external parties to minimize financial risk.
Retained Earnings
Profits that a company reinvests rather than giving out to owners or stockholders is called retained earnings. Within Nigeria, retained earnings is a common type of financing for SMEs that do not have access to external funding.
This type of financing is cost effective as it does not incur interest or have repayment schedules. Retained earnings financing ensures owners have complete operational control. However, retained earnings depend on profitability, meaning they can be limited or unavailable for new businesses or those that are struggling. Overreliance on retained earnings can also slow expansion if significant capital is needed for growth.
Ordinary (Equity) Shares
For incorporated businesses, it is understood that issuing ordinary shares is considered an internal source if funding is collected from existing owners/shareholders. When an owner nets additional funding, they are strengthening the business’ finances without taking on additional debt.
Equity shares do not have to be paid back, relieving some pressure from cash outflows. This does mean that ownership and profit rights, in the form of dividends, will be repealed. Equity financing in Nigeria is more prevalent in larger businesses and startups with growth potential, especially those that are preparing for future investment rounds or new public listings.
Other Internal Sources
The other internal sources include the streamlining of cash flows, the sale of unused assets, and the reduction of working capital. For instance, a business might dispose of old vehicles or equipment to obtain cash for more productive investments. Likewise, enhanced control of inventories and the speedy collection of receivables can liberate cash for other operational uses.
The techniques described here are often undervalued, especially since they provide short-term relief without incurring external liabilities. Nevertheless, the main limitation of these techniques is scale. They are unlikely to provide the necessary funds to sustain larger projects.
External Sources of Business Finance
External sources imply sourcing funds from outside the business. These sources are particularly necessary for new ventures and rapidly expanding businesses as well as for capital intensive industries.
Bank Lending
Bank lending is, and continues to be, a major source of business finance in Nigeria. Commercial banks, microfinance banks, and development finance institutions all grant businesses loans, overdrafts, and other credit facilities.
Bank loans are easier to obtain and can provide in a short time big amounts of money, making them more attractive for funding major business expansions and for acquisition of new assets. However, such loans are usually associated with a range of challenges such as high-interest rates and demands for strict repayment periods and collateral. Many Nigerian SMEs do not easily gain access to such bank credit due to their limited credit history and insufficient collateral.
Loan Stock
Loan stock is a long-term debt financial instrument provided by companies to obtain funding from customers and pays a fixed interest and is repaid after a determined time. In Nigeria debt stock is more prevalent with large established companies.
A loan stock has the benefit of providing long-term financing without losing partial company control. But the financial risk of the company rising during poor economic times increases, as loan interest rates must always be paid.
Venture Capital
Venture capital, funds provided by the investors of a business with the potential of high growth, is in exchange for equity. Venture capital in Nigeria is more common in technology, fintech, and agri-business.
Venture capitalists do not just provide funding; they also provide their experience in the field, their connections, as well as their planning and do-adding-knowledge, making it highly beneficial for new companies. However, these investors more often than not expect the high amounts of profit; therefore, a greater stake of their ownership of the valuable business is lost.
Leasing and Hire Purchase
Hire purchase and leasing, in asset financing, provide the means for firms to use equipment without the need to make the full payment for the equipment up front. Leasing allows the renting of a fixed-term asset, while hire purchase enables the attainment of the full ownership of the asset after making a series of payment installments.
These techniques are common in Nigeria for acquiring college textbooks, vehicles, office technology, etc. These techniques allow one to maintain positive cash flow, while avoiding large capital expenses. The main disadvantage is the total expenditure is higher than buying the item outright.
Government Assistance and Grants
The government of Nigeria, through its various agencies, has a wide range of funding programs aimed at supporting businesses, particularly for Small and Medium Enterprises (SMEs) and start-ups, which come in the form of grants, subsidised loans, and intervention funds.
When it comes to government assistance, there are lower interest rates for longer periods of time, more flexibility for the beneficiary. However, the availability of such assistance is often restricted, which is often accompanied by complex application procedures and lengthy delays. At the end of the day, although there is a lack of availability, government funding is still a major contributor to the country’s entrepreneurship base development and the economy’s overall growth.
Franchising
From a financing standpoint, franchising is a business model where an entrepreneur receives the right to operate a business under a specified brand for a fee or royalty. While it is not a direct cash resource, the model helps startup a business with lower risk and reduces the financing needed as it comes with brand recognition and an established business system.
In Nigeria, franchising is an approach that is widely adopted, particularly in the food services and hospitality industries. It is especially helpful to startups, as they do not need to build a business model from scratch, and if they need it, the franchising becomes a solid base for acquiring additional funds.
How to Choose the Right Source of Finance
How to choose the right Source of Finance will need balancing what the business needs, how much money is available, and the other goals they want to accomplish over time, since finance refers to how a business entity plans to raise funds from various sources of finance to support business operations and long-term business development.
Step-by-Step Approach to Choosing a Source of Finance
The first thing to do is say what the finance will go towards. Will it be designed to go towards working capital, purchasing raw materials, buying new assets like a new factory, or is it going to be used for expanding into new markets and securing capital for growth? After that, the company decides how much money it will need and how long it will need it for. This helps clarify whether the required sources of funds fall under short-term sources, often needed within one year, or long-term sources used to finance strategic investments.
The 3rd thing to do is to look at the advantages and disadvantages of each funding option, including risks and costs. Some of these will be interest payments, specific repayment terms, and whether financing involves debt or equity financing, which may dilute ownership or preserve the owner’s control. The business must assess if it will rely on borrowed funds, a secured loan, or equity capital, and whether it can manage repayment with interest, including principal and interest, without risking default or bankruptcy. In the end, the business should look at what it will be able to do and whether it should mix together a few main sources from various sources of finance to meet different business needs.
Factors Affecting the Need for Finance
There is a range of different reasons, that can affect the decisions that are made. Things like how big the business and what point in its lifecycle it’s at, which sector it’s in, and how stable its cash flow is. A new business is likely to need finance in the form of equity and government programs while an older company will likely go for a bank loan or use the money that is already in the company.
The economic climate will also have an influence on the cost and availability of finance in a certain country. Things like inflation and interest rates can make it more difficult to get finance in a certain country. Also the absence of certain regulations and the rules that have to be followed will affect what kind of external finance can be used or what type of external finance will be available.
Comparing Major Sources at a Glance
Internal sources lack scale but are less risky and cheaper. External sources are costly and more risky but can provide larger amounts. Equity financing is less risky in terms of repayments but ownership is diluted, while in debt financing, control is maintained but the risk is higher. Businesses need to understand these trade-offs to incorporate financing into their business strategy.
Conclusion
There are several sources of business finance in Nigeria, and these continue diversifying with the progress of the economy and the financial sector. Each of these sources, from internal such as retained earnings, to external like bank lending, government programs, and venture capital, are tailored to address specific business requirements.
This understanding enables entrepreneurs, managers to make accurate and timely decisions, mitigate risks, and facilitate growth. The optimal level of financing is more than a simple matter of availability as is often the case with entrepreneurs, but ensuring the financial architecture of the business is coherent with its objectives in the long term.
FAQs
What is the difference between internal and external sources of finance?
Internal sources are from the business itself like retained earnings and selling of assets, while external sources are from outside the business like banks, investors and government programs. Internal finance poses less risk, but external finance allows access to much larger funds.
How can startups access venture capital in Nigeria?
Accessing venture capital entails constructing sound business models, designing robust business plans, and then forming relationships with investors through incubators, accelerators, and other platforms. A clear organizational structure and the ability to catalyze substantial interest are invaluable.
What are the advantages of retained earnings as a source of finance?
The cost of retained earnings as a source of finance is low, as money does not need to be repaid. Furthermore, the business owner does not need to share control over the company. Retained earnings are also complementary to the financial position of the business. On the downside, retained earnings can only be used if a business is profitable, and may restrict growth if insufficient profits are generated.
How does leasing differ from hire purchase?
When leasing, a company can use an asset for a specified period of time, but ownership stays with the original owner. In hire purchase agreements, a business can use an asset for a specified time but takes ownership after making the required payment. A leasing agreement is flexible but hire purchase agreements are better for a purchase where an ownership is intended.
What government programs are available for business funding in Nigeria?
The Nigerian government, through its development finance institutions and government agencies, provides a wide range of activities, including lending to small and medium enterprises, offering intervention funds, as well as providing grants. These activities aim to support entrepreneurial activities, stimulate job creation, and develop specific sectors.
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