Piqued by the unprecedented lull that has bedevilled Nigeria’s capital market in the last few years, stock market investors have urged the Securities and Exchange Commission (SEC), to interface with the government on measures that would promote venture capital in the country.
Venture capital refers to the initial fund or equity capital made available to start-ups, and already existing companies by high worth individuals, corporate organisations, among others, who specialise in building high-risk financial portfolios, to foster growth and development.
With venture capital, the venture capitalist gives funding to the start-up company in exchange for equity stake in it, through which it can expand and approach the banks for loans.
This is essential for start-ups with limited operating histories and high upfront costs, as many entrepreneurs have great ideas, but struggle to bring them to fruition due to lack of funding.
Against this backdrop, investors noted that for small and medium-sized companies (SMEs) that are not yet large enough to go public, SEC, working with venture capital firms can be a good alternative to going through an initial public offering (IPO).
According to them, there is a need for SEC to intensify enlightenment campaigns in the market, to enable shareholders and other market participants to fully understand the concept and apply it towards the growth of the market and the entire economy.
They noted that these SMEs may grow and subsequently approach the capital market to raise more funds.
Specifically, the President, Constance Shareholders Association, Shehu Makail, said developing venture capital industries enables small businesses to grow by providing capital for their expansion, adding that these SMEs may grow and subsequently approach the capital market to raise more funds.
“Venture capital is a good and viable alternative for financing Small and Medium Enterprises. Indeed, for a country like Nigeria, eager to achieve economic growth, diversify and create employment for the people, the promotion of venture capitals deserves every support.”
The President, Standard Shareholders Association of Nigeria, Godwin Anono, urged SEC to be at the vanguard of promoting venture capitals in Nigeria, since SMEs have been adjudged globally as the driving force for contemporary economic growth and development.
He noted that equity financing provided by formal venture capital companies is key economic growth.
The Chief Executive Officer, Enyo Retail and Supply, Abayomi Awobokun, in a recent forum held at the Nigerian Stock Exchange (NSE), also stressed the need to create more awareness on the existence of venture capital in Nigeria, to boost SMEs operations.
“A lot of people do not know that venture capital does exist, so more people have to talk about venture capitalists and their activities.
“Again, for these start-ups, management is still young in the job. More so, in the area of governance, these start-ups need to get a board, and +get people on board who can guide the management,” he said.