Feature/OPED
Digitisation: Tackling Access to Finance for SMEs
By Michelle Knowles, Oladapo Adeigbe
Access to finance remains one of the single biggest constraints for small and medium-sized businesses on the African continent.
Nevertheless, it is important to understand the exact nature of the financing challenges experienced in order to design the tools to build financing capacity in this key sector of the economy.
When discussing SME financing, we tend to focus on early-stage and start-up financing. While this is certainly an important topic in the small business ecosystem, this may not necessarily be where financing efforts should be focused.
Rather a concerted effort to improve the value proposition around trade finance may offer a higher impact solution, particularly in Africa where the trade financing gap has risen to $82 billion and is still widening. Trade Finance is the oil that greases supply chains and ensures that buyers and sellers can ultimately fulfil their obligations.
For instance, a construction company places an order for work overalls from a local supplier. The construction company might only pay for the fulfilment of the contract.
However, the supplier has to deal with manufacturing capacity, people and raw materials to fulfil the order. This roadblock is a common issue for small businesses who receive orders but are unable to readily access the finance to fulfil these orders – it impacts not only the organisation which has received the contract but also the downstream suppliers.
Without finance to facilitate the transaction, the entire supply chain comes to a halt.
Trade finance becomes highly relevant here, by introducing liquidity into this transaction.
One of the segments that has been impacted the most by the exit of large global banks in frontier and emerging market economies (following the economic fall-out of the ongoing COVID-19 pandemic and the subsequent impact on the availability of trade finance) is SMEs.
The reasons for this are varied but the cost of regulation in the sector has increased, the perceived credit-worthiness of SMEs and lack of credit data are issues and foreign currency availability challenges persist when it comes to trade.
Financial inclusion across Africa is yet to peak as most SMEs operate in the informal sector and are largely unbanked. Hence, their viability cannot be ascertained or assessed directly by financial institutions.
More, the hurdles that impede growth in the informal market have not been effectively tackled. For example, an average transaction that involves, for instance, customs clearance in the local ports requires tons of paper documents which slow down trade activities by forcing unnecessary supply chain bottlenecks.
These trade and finance situations form a hurdle for a larger percentage of the SMEs who require ease of doing business and the valuable financial products offered by the banks to drive their growth plans.
It is for this reason Absa is focused on powering trade finance across Africa and enhancing the role that digitisation will play in facilitating access to finance for small businesses.
Digitisation is a key enabler in democratising trade finance and the pandemic has accelerated the adoption of digital trade finance solutions by SMEs and corporates. While technology-driven solutions are becoming more and more relevant, much of the trade finance sector is still very paper-driven with manual processes slowing down access to finance.
To digitize trade finance, the entire ecosystem needs to support and participate in re-imagining how we unlock value. This includes integrating activities between all role players including the regulators, the logistic companies, banks and other non-bank financial institutions (e.g., fintechs).
This will drive a concept that is known as Digital Trade Ecosystems which are secure online platforms that facilitate the exchange of data between partners in trade finance networks and will be a catalyst for the sector.
While innovation and technological advancements are important, there are three issues that have to receive urgent attention over the coming year to leverage the positive impact digitisation could have on SME’s
The first is a focus on the interoperability of systems to facilitate coherent industry-wide solutions that can operate at scale. This will become particularly relevant in Africa with the opening up of the African Continental Free Trade Area which is expected to be a big driver of cross-border trade.
The second issue will be Standardisation. A major issue for the sector as a whole is that only parts of the Trade and Trade Finance process are subject to digital innovation, whereas the end-to-end digitalisation across the trade value chain remains fragmented. We need a common language, technology and credit-scoring systems to facilitate faster access to solutions.
Thirdly, there needs to be a focus on more agility in the regulatory space. A perfect example of this is the limited acceptance of electronic documents and digital signatures on contracts by banks and other stakeholders. Millions of dollars of transactions could be freed up through the adoption of these digital tools, but there needs to be regulatory buy-in as a priority.
Digitisation must be supported by increasing foreign currency availability, and regulatory reform as it relates to the treatment of trade finance. Hence collaboration is required between the financial industry, Fintech, DFI’s and regulators. At Absa, we have seen and continue to see, increasing demand for these digital solutions and are accelerating our efforts to be a key driver of trade finance solutions on the continent and to be an enabler of the AfCFTA Agreement which is a critical step to building a healthy SME ecosystem for Africa.
Michelle Knowles is the Head of Trade Finance at Absa, while Oladapo Adeigbe is the Head of Financial Institutions Trade Sales at Absa
Feature/OPED
What Does Nigeria’s $51bn Reserves Milestone Mean if Most New Foreign Money Can Leave Quickly?
Nigeria’s foreign reserves have climbed to about $51 billion, a decade-plus high, according to the Central Bank of Nigeria (CBN). EBC Financial Group (EBC) notes that this reflects stronger investor confidence, but the second half may show whether it holds, as the build rests on three cyclical drivers: oil earnings, short-term foreign money and a narrowing official-to-street naira gap.
Reserves rose from about $32 billion in April 2024, during a dollar shortage, to about $51 billion now, near the CBN’s target. Much came from two cyclical sources, strong oil earnings and money chasing high-yielding naira assets, so EBC expects the pace to slow or reverse. Fitch Ratings, a major international credit rating agency, expects a marginal decline to about $47 billion by the end of 2026, citing higher spending and external pressures.
David Precious, Senior Market Analyst at EBC Financial Group, said, “Nigeria’s reserve build is real but may not be durable yet, because nearly all of the new money is the kind that can leave quickly. Of the $10.37 billion that came in over the first quarter, the overwhelming majority was short-term portfolio funds rather than long-term investment, so a shift in oil prices, global interest rates or confidence in the naira might pull a large part of it straight back out.”
Most New Money Can Still Leave Quickly
The composition of the foreign inflows explains the caution over how long the build can last. The country attracted $10.37 billion in foreign investment in the first quarter of 2026, up 83.83 per cent year-on-year, according to the National Bureau of Statistics (NBS). Of that, $9.86 billion or 95.09 per cent, was portfolio money, largely short-term naira debt such as Treasury bills that investors can sell at the next auction, while foreign direct investment, the long-term kind that builds factories and jobs, was $135.08 million, or 1.30 per cent. Put simply, of each dollar coming in, about 95 cents can leave quickly, and barely one cent stays.
That money supports reserves while it stays. Dollars brought in to buy naira assets add to market supply, letting the CBN hold more reserves and steady the naira. It leaves when conditions change. Nigeria earns most of its export dollars from oil and gas, so lower oil prices mean fewer dollars, and as a member of the Organisation of the Petroleum Exporting Countries (OPEC), it cannot simply produce more, output capped by quota and reduced by theft and ageing fields. Higher global interest rates draw money toward safer returns abroad, and a weakening naira prompts investors to sell early. When oil fell in 2016 and 2020, foreign investors withdrew and could not convert naira to dollars as supply dried up, leaving the CBN to clear more than $7 billion in trapped obligations into 2024.
The Oil Boost is No Longer Certain
Oil looked like a dependable source of the dollars behind the reserves only months ago. Earlier in 2026, concern over disruption around the Strait of Hormuz lifted crude prices, and stronger receipts flowed in, with crude oil export earnings of $8.11 billion in the first quarter in the CBN’s balance-of-payments data. That support is now easing. The tension has subsided, and Brent traded near $72 on June 29, down about 24 per cent over the month, back to pre-conflict levels. With the price boost gone and output constrained, reserves are more exposed, leaning on non-oil earnings and investor patience rather than oil.
The Naira Still Trades at Two Prices
The naira has traded at two prices, an official rate and a higher parallel-market rate, and closing that gap into one trusted price is what many investors might watch most. Before committing funds, they may want assurance they can convert naira to dollars at a fair rate when they exit, and a wide gap revives the fear of being trapped that lingers from earlier shortages. The gap has narrowed to roughly N20 to N30, with the CBN’s official rate near N1,380 per dollar on June 26 against parallel-market quotes around N1,400. The International Monetary Fund (IMF) 2026 Article IV review urged Nigeria to depend less on this fast-moving portfolio money and to keep phasing out its multiple exchange-rate practices. The CBN’s Foreign Exchange Manual, in force from 1 June, is intended to make the market clearer, though such rules build confidence only once investors can freely trade dollars at the posted rate.
What could Make the Build Durable
A few signs that may show the build turning durable include a smaller gap between the official and street naira rates, more long-term foreign investment, and steadier oil earnings. A gap that stays small, now roughly N20 to N30, may mean investors trust the official rate and no longer need the street market. A clear rise in foreign direct investment, only $135 million last quarter against $9.86 billion of short-term money, might mean lasting capital is replacing funds that can leave at the next auction. Oil earnings that hold up, rather than sliding from the low $70s, should help keep reserves steady, since oil and gas bring in most of Nigeria’s export dollars.
“Reserves built on money chasing high yields can fall as fast as they rose, as they did after the last two oil shocks, when investors left, and the CBN spent years clearing a foreign-exchange backlog,” Precious added. “What holds through a downturn is slower money, direct investment, steady oil and non-oil export earnings and one credible naira rate, and that is the shift Nigeria has yet to make.”
By Olajumoke Bello
Across Nigeria, small and medium enterprises remain the backbone of economic activity. They drive trade, create jobs, and sustain millions of livelihoods. Yet, despite their importance, many SMEs continue to operate below their full potential due to persistent structural challenges.
Access to finance remains one of the most cited constraints. However, the issue today goes beyond the availability of capital. Many businesses struggle with financial readiness, weak documentation, and limited understanding of what lenders require. This often leads to missed opportunities, even when funding options exist.
At the same time, SMEs face gaps in market access and visibility. Business owners operate in highly localised environments, with limited exposure to broader networks that can unlock partnerships, new markets, and growth opportunities. This isolation can constrain scalability and reduce long-term competitiveness.
Equally important is the capability gap. Many entrepreneurs grow through resilience and experience but lack structured knowledge on critical areas such as financial management, export readiness, and digital adoption. Without this, even well-capitalised businesses can struggle to sustain growth.
These challenges point to a clear need for a more practical and integrated approach to SME support. It is no longer sufficient to offer standalone solutions. SMEs require ecosystems that combine knowledge, access, and direct engagement in ways that reflect how they actually operate.
A key shift is the move from centralised interventions to localised engagement. SMEs are deeply influenced by their immediate environments, whether markets, industrial clusters, or trade corridors. Solutions must therefore be brought closer to where these businesses function, allowing for more relevant support and stronger relationships.
Another important shift is from awareness to action. Business owners do not only need information; they need insights that they can apply immediately. This includes understanding how to structure their finances, how to access trade opportunities, and how to connect with the right partners to scale their operations.
There is also a growing need for continuity. Many SME-focused initiatives deliver strong initial impact but lack follow-through. For support to be effective, it must extend beyond one-off engagements into sustained relationships, with clear pathways for onboarding, advisory, and growth.
For financial institutions, this presents both responsibility and an opportunity. Supporting SMEs now requires moving beyond transactional banking to deeper partnership models. It requires understanding businesses at a granular level and co-creating solutions that evolve with their needs.
At Stanbic IBTC, this perspective continues to shape our approach to SME development. Our focus is on delivering practical support that translates into real business outcomes, helping enterprises grow, compete, and contribute more meaningfully to the economy.
As part of this commitment, we are extending our SME engagement to the regions through the Nigeria Business Summit Regional Tour. The tour will take structured, on-ground activations into key commercial hubs, where SMEs can access funding guidance, trade insights, advisory support, and direct engagement with financial experts.
The regional tour will take place across five strategic locations, bringing these solutions closer to business owners in Aba, Onitsha, Ibadan and Kano.
This approach reflects an important principle. When support moves closer to businesses and when solutions are delivered in ways that are practical and continuous, SMEs are better positioned to grow sustainably. In turn, this strengthens not only individual enterprises but the broader economy.
Olajumoke Bello is the Head of Enterprise Banking at Stanbic IBTC Bank
By Winston Osuchukwu
The average Nigerian borrower is widely considered high-risk – a claim repeated in credit committees, priced into retail loans, and largely treated as settled fact. Every credit market accepts that an individual loan may not be repaid; this is ordinary, priced risk. The high-risk claim, however, is applied to whole segments – the informal trader, the gig economy earner whose income is steady but split across several accounts, the remote worker paid by an overseas client into a fintech FX wallet. What the assessment establishes is not whether they are likely to repay, but how they fit into an arbitrary segment. Having spent years building decisioning systems for this market, my thesis is a specific one: “high-risk” does not mean “no credit” – it simply requires that the lender embrace alternative datasets to price the risk appropriately.
This is not a criticism of the institutions that built their frameworks around collateral and documentation; those were rational responses to the tools available at the time. When data is scarce, prudence means defaulting to the status quo. The limitation is not that this approach is wrong, but that it leaves a blind spot – excluding fundamentally sound borrowers whose economic lives simply are not captured on the bank’s ledger. A market trader who has moved consistent, growing volumes of cash through mobile money for three years is not, in any meaningful sense, unknowable. Their financial behaviour is observable and patterned; it simply occurs outside the traditional banking system, rendering it invisible to conventional underwriting.
This is the gap technology is now positioned to close – not by replacing institutional judgment, but by augmenting it. When AI-driven analysis is applied rigorously to the financial behaviour these borrowers generate, a far more complete picture of their repayment ability emerges – and a meaningful share presents a risk profile that compares favourably with segments the traditional system has long considered safe. The “high-risk” label, applied broadly to an entire category of borrower, was never a risk pricing tool so much as the limit of what the available tools could see.
For banks, this is the opportunity to extend capital with confidence beyond the borrowers who fit their stringent criteria. Nigerian banks are highly liquid; the constraint on credit growth has rarely been capital, but the ability to assess and price the borrowers who sit outside the traditional file. Close that gap, and the whole ecosystem strengthens: banks grow their loan books into segments they have long wanted to serve, and the real economy gets the capital it needs to expand.
This is precisely what we focus on at Mathesis Analytics: building AI-powered credit decisioning that gives lenders a fuller, more defensible picture of the individuals long excluded as high-risk when they were simply misjudged. The Nigerian credit gap has never been a non-lendable population problem, but one of incomplete visibility. By unifying varied data sources and partnering with the institutions that hold the capital and scale to move the market, we translate out-of-ecosystem behaviour into reliable, bank-grade risk scores. Closing this gap is one of the clearest, highest-leverage opportunities in Nigerian financial services today.
Winston Osuchukwu is the founder & CEO of Mathesis Analytics
