…Seek more emphasis on local sources of finance, as against foreign capital
As Africa accelerates efforts to deepen intra-continental trade and support homegrown businesses, panelists at the ongoing West African Economic Summit, have called the continent to reduce overreliance on debt-based financing, especially those from foreign investors.
This is just as they noted that a $70 million investment in regional trade facilitation projects has already delivered $213 million in cost savings, a 240 percent return on investment within just one year.
The figures, seen as a major endorsement of regional integration, also underscore the importance of capital deployment strategies that prioritise long-term value over short-term debt repayment cycles.
“This kind of return really incentivises more trade in Africa. But to scale these results, we need to change how we finance”, a panelist noted.
Speaking at the summit, the panelist, including Matthew Stephenson of the World Economic Forum, Jumoke Oduwole, Minister of Trade and Investment, Farouk Boumel of TGI Group stressed the need for Africans to rely more on local sources of finance, rather than relying on foreign capitalists whose motives may not ally with local policies
They noted that for the continent to truly unlock the potentials of the African Continental Free Trade Area (AfCFTA), it must put equity financing, especially for small businesses and informal enterprises at the centre of its growth strategy.
The panelists, while discussing the topic, “Overcoming Barriers to Harnessing AfCFTA for Stronger Inter-Regional Trade” spotlighted financing challenges as a major roadblock for small and medium-sized enterprises (SMEs).
They noted that “despite the continent’s vast economic potential, intra-African trade still accounts for less than 20 percent of total trade, far below other regions.
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According to them” this gap cannot be bridged through policies and infrastructure alone but must be supported by inclusive and innovative financing models that work for the street trader in Kano, Nigeria as much as the manufacturers in Accra, Ghana
Stressing the dominant roles banks play in sourcing for capital, industry leaders stressed that true transformation requires a shift toward equity, capital that supports businesses without burdening them with debt they may never be able to repay.
“Debt is not the first go-to if you’re looking to fund goods, services, or products,” one panelist stated. “Equity needs to come in first.”
Jumoke Oduwole, Minister of Industry, Trade and Investment of Nigeria, announced a new partnership between international trade partners and the Ministry of Industry, Trade and Services to streamline service delivery and dismantle the regulatory barriers that make cross-border commerce expensive and inefficient. Participants stressed that for AfCFTA to succeed, trade in services must be equally prioritised alongside goods.
She noted that in the digital front, the Nigerian Ministry of Industry unveiled a new digital trade challenge to spotlight fast-growing startups delivering tech-driven trade solutions.
“The initiative, according to her, aims to promote homegrown innovation, encourage investor interest, and bridge the digital divide across Africa’s trading landscape.
“We’re very proud of this next phase. It showcases companies that are making trade faster, cheaper, and more efficient”, she stated.
The forum’s most urgent call to action focused on financing models for African SMEs, particularly the need to shift from debt to equity.
Many SMEs, speakers argued, are already funding their businesses with personal savings, community support, or informal equity. Yet traditional bank loans remain inaccessible due to strict credit scoring systems and high collateral requirements.
While over 50 private equity and venture capital firms operate in Nigeria, fewer than 5 percent of them offer local currency funding.
Most investments are in foreign currencies and target large capital needs of $5 million or more, making them largely irrelevant to small businesses, many of which need less than ₦1 million (about $500) to scale their operations.
“Some SMEs just need modest support in naira to unlock their potential. But they’re excluded from these funding pools”, one speaker said.
Panelists also urged African countries to look beyond banks and toward capital markets, pension funds, and asset managers as alternative sources of trade financing.
They emphasized the need to design financing tools that reflect the maturity levels of different business categories—from informal market traders to mid-sized enterprises aspiring to go formal and scale.
“We can’t keep having the same banking conversation. Capital markets, asset managers, even pension funds, they all have a role. We need diverse models for diverse businesses”, said another contributor.
The discussion also focused on the structural and regulatory challenges hampering AfCFTA implementation, and noted that ” despite existing policy frameworks, countries still grapple with fragmented customs rules, fluctuating border protocols, and poor coordination, issues that increase costs and discourage small businesses from scaling up or formalizing.
Panelists highlighted that transporting goods across African borders can add up to 60 percent to production costs, with exporters sometimes needing to complete 40 different documents for a single shipment.
” This inefficiency severely limits profitability and the ability to service loans, another reason equity financing is viewed as a better fit for early-stage businesses.”
Farouk Boumel of TGI Group stressed that while AfCFTA seeks to unify Africa’s trade landscape, informal trade—often built on tribal and cultural ties is already robust. However, transitioning from informal to formal systems often increases costs and disrupts organic trade flows.
“Africans are trading, but not formally and not fairly. Imposing rigid formal structures without understanding how informal markets work only adds friction and inefficiencies”, Boumel said.
He added that Africa must find a way to support informal traders without destroying the ecosystems they rely on, particularly during peak production periods when foreign imports often undercut local prices.
Participants called for the expansion of Nigeria’s payment infrastructure model to other parts of West Africa, emphasizing that seamless payments are key to unlocking trade.
Equally important, they said, is the use of local capital to fund local businesses, rather than depending on foreign investors whose objectives may not align with long-term development goals.
Matthew Stephenson of the World Economic Forum highlighted WEF’s investment in 21 trade facilitation projects across Africa, working with firms like Coca-Cola and Novartis to tackle bottlenecks.
He said success depends on converting AfCFTA from “a document into a lived experience” for small and medium enterprises across the continent.
They recommended that the AfCFTA must be implemented from the ground up. “That means starting with informal traders, MSMEs, and local communities, creating enabling environments through data, simplified processes, and inclusive financing.
“There’s no shortcut. We must coordinate, digitize, and invest. Most of all, we must make sure our financing models work for the people who need them most”, a panelists said.
Experts remain hopeful that these insights will spark a new era in African trade, one where equity, not loans, paves the way to inclusive and sustainable growth.
