Businesses owned and led by Black entrepreneurs in Nigeria face a $131bn financing shortfall, the largest among five African markets assessed in a new study, as limited access to growth capital continues to constrain the expansion of indigenous enterprises.
The funding deficit represents about 63 per cent of the combined $209bn financing gap identified across Nigeria, South Africa, Kenya, Senegal and Côte d’Ivoire, raising concerns about the ability of locally owned businesses to scale their operations, attract investment and contribute more substantially to economic development.
The study was commissioned by British International Investment (BII) and Swedfund and conducted by Open Capital Advisors to examine the financing needs of Black-owned and Black-led businesses, described in the report as BOLD businesses.
South Africa recorded the second-largest financing gap at $45bn, followed by Kenya with $23bn. Senegal and Côte d’Ivoire had shortfalls of $5.7bn and $4.6bn, respectively.
The findings highlight the disproportionate financing challenges facing Nigerian enterprises and the difficulties they encounter in obtaining the capital required to expand operations, increase production, enter new markets and create jobs.
BII’s Africa head, Chris Chijiutomi said businesses that cannot secure adequate financing for growth risk remaining at their existing levels of operation, limiting their capacity to support wider economic development.
“If these businesses aren’t getting capital for growth, they’re just plateauing. They’re still working as businesses, but they’re not able to grow,” Chijiutomi said.
“They’re not helping to contribute to broad economic development.”
Chijiutomi attributed Nigeria’s significantly larger financing gap, in part, to the country’s population and the number of businesses operating in its economy.
“Nigeria has 200 million-plus people,” he said, adding that some of the challenges identified in the study were more pronounced in Nigeria because of the volume of businesses in the country.
The report found that Black-owned and Black-led businesses are predominantly small enterprises, with their representation declining as companies increase in size.
This pattern suggests that many indigenous businesses struggle to transition from small-scale operations into larger enterprises capable of attracting substantial investment and generating greater economic value.
For Nigeria, the financing deficit presents a significant challenge to the growth of indigenous companies, particularly those seeking to move beyond the small-business stage and compete more effectively in domestic and international markets.
The study identified limited access to investor networks, inadequate investment readiness and a mismatch between available financing structures and businesses’ growth requirements as major barriers to accessing capital.
It also highlighted the potential influence of bias among capital providers, particularly where investors do not share the social or ethnic backgrounds of entrepreneurs seeking funding.
These barriers can make it difficult for business owners to establish relationships with investors, demonstrate their commercial viability and secure financing on terms that support sustainable expansion.
The report noted that businesses seeking substantial growth capital often face more stringent requirements than smaller enterprises. Investors typically expect companies to maintain reliable financial records, demonstrate sound corporate governance, present credible business plans and show their capacity to manage additional capital.
However, some businesses lack the resources, technical expertise and institutional structures required to satisfy these expectations, further limiting their access to investment.
Although microfinance, grants and conventional bank loans can provide funding for smaller enterprises, businesses seeking larger amounts of capital may struggle to find financing suited to their expansion plans.
This creates a gap between the funding available to establish and sustain small businesses and the larger investments required to expand production, acquire equipment, enter new markets and strengthen operational capacity.
The findings point to the need for development finance institutions, commercial banks, private equity funds and other capital providers to review how they identify, assess and finance indigenous businesses.
Improving access to capital, the report suggests, would require financing arrangements that reflect the needs of businesses at different stages of development, alongside measures to strengthen their investment readiness and access to potential investors.
Chijiutomi said institutions such as BII would need to make their funding more accessible to Black-owned and Black-led businesses and establish specific targets to increase financing for the category.
Such measures could help address some of the structural barriers preventing viable enterprises from obtaining the capital required to expand.
However, the scale of the financing gap suggests that efforts to improve access to growth capital would need to involve a broad range of financial institutions and investors rather than relying on individual funding initiatives.
Closing the shortfall could enable indigenous businesses to expand their operations, increase investment, create employment and improve their contribution to economic productivity.
For Nigeria, where the financing gap accounts for nearly two-thirds of the combined shortfall across the five markets, improving access to growth capital remains a major challenge for businesses seeking to progress beyond small-scale operations.