What it’s like to be a small business in Nigeria


Kehinde Oyeleke, CEO of Seedvest

When I went to interview Kehinde Oyeleke, CEO of Nigerian SME funding and advisory firm Seedvest, stray pieces of paper covered the desk at his Ikeja office. Some of them were scrunched up. Others were lying there like lost tourists in a city center – with no direction or intent.

He asked that I excuse the mess. “You know, it’s all in a bid to look busy,” he smiled, rounding up a few of the stray papers and stacking them on one side of the desk.

When Oyeleke started Seedvest in 2002, he’d had a successful accounting career with stints at the corporate finance division of Arthur Andersen, PwC in New York, and Capital Alliance, a private equity firm in Nigeria.

It was while at the private equity firm that he became aware of the funding gap that was crippling Nigerian small businesses.

“Private equity operators are always looking for people who want to borrow US$10m, $5m. And I see a lot of gaps – people that need ₦2-3m [US$6-9,500].”

He believes that Nigerian banks are not set up to support small businesses.

“That leaves small businesses in the lurch,” he said, adjusting his glasses. “Our mission is to ensure that small businesses get access to the finance they need to grow. And the range of what we give is from ₦30-50,000 [$95-160], for a woman selling by the road side, for example, to as much as ₦25-30m [$79-95,000] to SMEs that really want to expand their business.”

In 2001, a few months before Oyeleke started Seedvest – which now has a micro-finance bank operation as well as an SME finance arm with 27 branches in Lagos and Ibadan – the Central Bank of Nigeria introduced new regulation. It mandated that commercial banks devote 10% of their profit after tax to SME financing.

The banks were not on board for long. The regulation “faded into oblivion”, says Oyeleke, with only a handful of success stories.

“Since then, SMEs have been orphans.”

The problem with funding small businesses

He was quick to add that funding small businesses in Nigeria is, however, difficult.

“Many of these SMEs don’t have good processes. Therefore, they could be very mobile. Somebody could be running a business today and the next thing you hear, he’s off to Canada along with your money.”

I asked how the small loans could possibly have a meaningful impact on a business. He smiled. “There are situations where ₦30,000 doesn’t even buy you a meal,” he said, before launching into a full explanation.

“Many of these people sell boli (roast plantain) and use that to send their wards to school. If you already have your fryer, you only need plantain to make boli. So if you have ₦30,000 you are in business. And sometimes getting ₦30,000 to buy plantain could mean the difference between being able to send your kids to school and not being able to.”

Seedvest, he added, wasn’t just about giving loans. “We are about financially empowering small and micro enterprises.”

In addition to capital, business advice is important, explains Oyeleke.

“I have seen so many organisations that died. They have fantastic operators, everything checks out, but the funding structure was inappropriate.”

He explained that generally, a business with a long gestation period does better with equity funding. To opt for debt funding is to court early demise for the business.

“Interest is going to eat up a major chunk of your income and you may be under funding pressure even when the project is still under construction,” he said.

On the other hand, a short-term project could get by with bridge loans like the ones Seedvest offers.

“If you are thinking about funding your business and you are not sure what to do, then it would help tremendously to get professional help.”


Nigeria’s recession is biting hard on the population. Top Nigerian banks are laying off workers. More than a few tech companies are also doing what they call “headcount reduction” outside the glare of the press.

In the face of dramatic economic downturns such as this, small businesses have been known to suffer the most, but according to Oyeleke, the recession has only made a bad situation worse.

“The reality is that SMEs have always had funding difficulty. Recession has made it worse because it has increased the naira value of the money they need. Even though the items they need to buy remain the same, the cost of buying those materials has more than tripled. But again, how much of this cost can they pass successfully to the customers?”

“What can small businesses do so they are more easily able to access funding?” I asked. Oyeleke perked up in his seat.

“They need to get a business plan. And that is a term that is easily misunderstood,” he said. “People think this is a sheet of paper that people go the internet and download and fill in the gaps. What they need to do is outline their business. You need to understand what you are selling, who you are selling to, why people will buy from you and how much people will pay you.”

He held up two fingers. “The next thing you need to look at is who is managing the business with you. The major problem that SMEs have is that everything revolves around them. So you need to ask yourself, ‘Where is my team?’ Ensure that if you are indisposed for a week or so, the business doesn’t crumble around you.”

Entrepreneurs should also know if their business is [subject to] regulation. “Basically, I can’t just go out there and start an insurance company. I can’t do that, there are regulations,” he said.

“You need to figure out who you are competing with in this business. And finally, the founder needs to know if the business can be operated profitably,” he concluded.

He wrapped his left hand around the right one, as though waiting for a verdict. I asked how small businesses should go about getting funding.

“Sometimes it’s not every situation that you need money,” he answered. “People have the obligation to seek out what funding sources are out there and who can advise on the best course of action. The time and energy spent in reaching out to good financial advisors will pay for itself with time.”

Gbenga Onalaja is a content strategist at VConnect and blog.vconnect.com. He’s @onalaja on Twitter.