Way Out For MSMEs In The Face Of Competition For Capital

Micro, Small, and Medium-sized Enterprises (MSMEs) in Nigeria often struggle to secure the necessary capital for growth and expansion.

However, recent developments by the Securities and Exchange Commission of Nigeria (SEC) have made it easier for the enterprises to raise capital. Here is an in-depth look at how MSMEs can navigate the competitive landscape in the country for capital and leverage new opportunities.

Leveraging SEC regulations

The SEC’s recent rules and regulations have opened new vistas for MSMEs to issue securities, making it possible for investors to buy into these enterprises. The regulatory support provides a viable way out for MSMEs by allowing them to bring in new shareholders and get listed on the stock market or issue new securities to attract investment for their development.

Importance of investor relations (IR)

In a competitive market, the quality of IR services for MSME can be a key differentiating factor. Effective IR strategies can significantly impact the valuation of a company, making it more attractive to investors. For MSMEs considering a regulated platform or seeking private investors or venture capitalists, presenting the entity attractively and honestly to potential investors is crucial.

 Preparing for the challenges of issuing securities

Management teams of MSMEs must be fully aware of the challenges they will face as issuers. These include meeting the high expectations of new ‘clients’—financial analysts, institutional investors, individual shareholders, and journalists, both domestic and international. Balancing short-term financial market expectations with long-term business objectives is also critical. Additionally, maintaining and increasing investor interest in their securities requires a consistent and convincing investment story to be handled by the IR.

Ensuring quality and consistency

To succeed in the capital markets, MSMEs must achieve the highest possible level of quality and consistency in their financial communication. This involves rigorous preparation for transactions, full compliance with legal obligations, excellence in delivering financial information and communication, clarity, conciseness, and persuasiveness in messaging, building confidence among investors, and investing time and resources to stay on the radar of journalists, analysts, and investors.

Transparency and media relations

At this stage, maintaining a transparent and healthy relationship with investors and the media is vital. MSMEs need to objectively separate strategic information that needs to remain confidential from what is necessary for valuation purposes. Embracing visibility can help these enterprises grow faster than their competition.

Considering timing for going public

Going public is a strenuous exercise that can slow or even halt growth temporarily. MSMEs should carefully consider the timing of their listing. In some cases, it might be wiser to postpone the listing until the company is better prepared to handle the demands of being publicly traded.

Navigating the competitive landscape for capital requires MSMEs in Nigeria to leverage regulatory support, enhance their IR strategies, prepare thoroughly for the challenges of issuing securities, and maintain transparency. By doing so, they can position themselves effectively through IR to attract the necessary funding for growth and expansion, ensuring sustainable success in the marketplace.