By Seun Oyediran
The Nigerian economic landscape is defined by the resilience of its micro, small, and medium-sized enterprises (SMEs). From the high-traffic supermarkets of Lagos to the critical distribution hubs supporting the hinterlands, millions of entrepreneurs drive our domestic commerce. Yet, a recurring theme persists in our boardroom discussions and macroeconomic reviews: the “missing middle.” While demand remains robust across various sectors, limited access to financing remains one of the several constraints affecting SME growth, effectively putting a limit on how much the country’s economy can grow.
The data provided by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is unequivocal. SMEs constitute approximately 96% of all domestic businesses, contributing nearly 50% of the national GDP and employing over 80% of the workforce. They are not merely a segment of the economy; they are the economy. However, the International Finance Corporation (IFC) continues to highlight a staggering credit gap. This structural bottleneck means that even businesses with proven product-market fit are often unable to fulfill orders, optimize inventory, or expand their footprint, simply because traditional capital remains inaccessible.
Merchant credit represents one financing option available to support working capital and inventory management needs. Unlike the rigid structures of traditional commercial lending, merchant credit is purpose-built for the velocity of trade. By injecting capital directly at the point of need, specifically for inventory replenishment, business expansion and equipment acquisition, it may help address short-term liquidity requirements for eligible businesses. For a merchant, the inability to stock goods is not just a missed sale; it is a loss of market share and a regression in cash flow momentum. Merchant credit may help eligible businesses address short-term liquidity constraints and support inventory management.
From a risk management and credit perspective, the evolution of digital financial services has revolutionized how we view SME creditworthiness. Historically, the absence of collateral or formal credit histories led to the systemic exclusion of many viable businesses. A data-driven approach shifts the focus from static assets to dynamic performance, enabling lenders to deploy capital into businesses demonstrating sustainable operational performance.
The macroeconomic implications of optimizing merchant credit are profound. Access to appropriately structured financing may contribute to broader economic activity, employment, and business expansion. In the context of Nigeria’s urgent need to diversify away from hydrocarbon dependence, the private sector, and SMEs in particular, must remain an important contributor to economic development. To build globally competitive brands and export-led enterprises, we must move beyond the rhetoric of “supporting” small businesses and transition toward integrating them into modern credit value chains.
The strategic imperative is clear. The chasm between a local business and a regional champion is rarely a lack of ambition; it is access to capital that remains a significant constraint for many businesses. If we are to foster a new generation of African industry leaders, we must prioritize the deployment of flexible, data-driven financing solutions. When responsibly structured and appropriately deployed, merchant credit can support business growth, inventory management, and operational continuity for eligible enterprises.
Seun Oyediran is the Director, Merchant Lending at Fairmoney