Financial literacy is essential to the health of the Nigerian economy 

Financial literacy is recognised globally as a major life skill and is vital in building sustainable businesses. And for entrepreneurs, it is a skill based on having the knowledge required to undertake a broad range of activities integral to business success, including: planning and managing business finances; identifying funding requirements and financial risks, complying with regulation and understanding the financial and economic landscape in which the business operates.

Improving financial literacy amongst Nigerian MSMEs – a study by the FATE Foundation in association with ACCA Nigeria – found the vast majority (73 percent) of Micro-, Small and Medium-sized Enterprises (MSMEs) in Nigeria surveyed, needed greater financial literacy skills  , which plays a significant role in the low levels of successful access to external finance. Eighty-two percent of entrepreneurs interviewed said they had no accountancy knowledge, while 20 percent of respondents interviewed believed financial literacy wasn’t important to their business.

Based on the report’s findings, which surveyed 6200 of Nigeria’s MSME entrepreneurs, a number of recommendations were made, including some of the following:

• Demonstrate the importance of financial literacy: Entrepreneurs must recognise their own knowledge gap. Action is needed to persuade a greater number of entrepreneurs that financial literacy is a key that opens the door to wider investment opportunities. This means that investors themselves also need to be clearer with MSME entrepreneurs about where their skill gaps and training needs lie.

• Expand the provision of financial literacy training: There is strong evidence financial literacy underpins business success. It is essential for a significant increase in financial literacy for the population of Nigeria as a whole, but specifically for entrepreneurs, including those heading up MSMEs.

• • Standardise Business Development Service Providers and a national financial literacy curriculum: This is so entrepreneurs are given the same level of education regardless of where they study. There should be clear distinctions made in the provision of basic, intermediate and advanced financial literacy learning. At the basic level, entrepreneurs should be able to understand basic bookkeeping activities.

• Establish feedback mechanisms to support continuous support: Entrepreneurs should be able to access support following any financial literacy training to ensure continuous development.

The head of ACCA Nigeria, Tom Isibor, says:

‘Nigeria has a real opportunity to be the most dynamic economy in Africa. One of the biggest challenges restricting this is our problem with financial literacy. This is a timely report which provides suggestions on how this country can benefit from improving its financial literacy, especially within the MSME sector – creating more sustainable, successful businesses.

‘We hope this study will encourage policy makers to develop a financial literacy framework for education in Nigeria.’

Adenike Adeyemi, executive director, FATE Foundation says: 

‘Understanding the most important foundational knowledge (financial literacy) required by Nigerian entrepreneurs is the first step to effectively supporting and enabling them. Our report provides the framework and guidelines required by any individual or organisation providing capacity building, advisory services and business development support to Nigerian MSMEs.’