Fiducia Data Services Limited recently hosted the Fiducia Factoring Forum in Lagos, emphasizing the significant impact of supply chain finance (SCF) on businesses and the overarching economy. The theme of the forum, “Unlock Your Growth & Boost Your Business,” underscored the potential of SCF to transform financial dealings, particularly for small and medium-sized enterprises (SMEs). SCF enables buyers to extend payment terms to suppliers while allowing the latter to receive payments sooner, effectively bridging the gap in cash flow that many businesses face. This arrangement, also known as supplier finance or reverse factoring, has been noted for its capacity to facilitate better financial management within the supply chain.
According to insights from the World Bank, the SCF market in Nigeria is substantial, with an estimated annualized financial potential valued at approximately N2.7 trillion. This figure represents the combined financing of payables, receivables, and inventory, crucial components of any supply chain. The market breakdown includes supplier finance, buyer finance, and inventory finance, highlighting the multi-dimensional nature of SCF and its role in optimizing business processes. The forum shed light on how effective supply chain finance can bolster businesses by enhancing liquidity and operational efficiency, thereby promoting economic growth at a larger scale.
Bunmi Lawson, chairman of Fiducia, highlighted the ongoing challenges in financing SMEs, asserting that despite advancements in technology, many small businesses still struggle with adequate financial support. She pointed out that large corporations often impose lengthy payment terms, forcing suppliers to wait considerable timeframes—often up to 90 days—before they receive payment for their goods and services. This reality creates a significant financial bottleneck for SMEs that require timely funding to maintain operations and pursue new opportunities. Lawson stressed that supply chain finance offers a viable solution to this issue by unlocking potential financial resources for SMEs, consequently boosting their profitability and growth prospects.
The benefits of supply chain finance extend beyond mere liquidity, as Lawson noted in her speech. She identified cash flow improvement as the primary advantage, allowing SMEs to free up capital that would otherwise be tied up in inventory. This swift access to funds enables businesses to pay suppliers promptly and even invest in other ventures. Furthermore, by facilitating a wider network of suppliers, SCF enhances a company’s ability to streamline its operations and reduce costs associated with financing. Such a system fosters competition among suppliers, driving down prices and enhancing service delivery across the board.
In addressing the specific context of Nigeria, Lawson emphasized that SCF can significantly mitigate the financial risks associated with volatile economic conditions, including fluctuating interest and exchange rates. The immediacy with which businesses can access funds provides a critical buffer against external financial pressures, enabling vendors and suppliers to secure their operations regardless of the broader economic landscape. By transforming how cash flows within the supply chain, SCF also promotes a more robust ecosystem for business growth, particularly in challenging markets.
Lastly, Imohimi Aig-Imoukhuede, the Managing Director and CEO of Fiducia, reiterated the platform’s dedication to providing essential capital resources for SMEs. He elucidated that the financing model focuses on the creditworthiness of the buyer rather than the inherent risks associated with SMEs themselves. This innovative approach reassures financiers about their investments and enhances the likelihood that SMEs can sustain their operations and expand effectively. With participants at the forum ranging from business owners to supply chain finance professionals, the discussions highlighted a collective understanding of SCF’s transformative potential in facilitating access to capital and driving economic growth. As the dialogue around supply chain finance continues to evolve, the insights shared during the forum reflect a growing recognition of its integral role in supporting entrepreneurial initiatives.
