A commercially focused law firm has encouraged Nigerian startups and small businesses to reassess their growth strategies and give greater consideration to debt-market instruments as a realistic and sustainable expansion pathway.
The firm delivered this message during a roundtable at its Lagos office titled “Scaling Smarter: Debt Markets as a Growth Catalyst for Startups.” The session gathered regulators, credit-rating specialists, tax professionals, investors, and other market stakeholders for an in-depth discussion led by the firm’s partners.
In its presentation, the firm outlined why debt market instruments are becoming a more compelling alternative to equity for emerging businesses. It argued that debt naturally promotes financial discipline, sharper decision-making, and operational accountability—traits that are often weakened in equity-driven models. The partners observed that many founders still lack clarity on the requirements for accessing capital-market debt, a gap that continues to limit their financing options.
The event featured contributions from leaders across the ecosystem, including senior executives from the Nigerian Exchange Group, GCR Nigeria, Payaza Africa, and Norrenberger.
Speaking at the forum, the head of the Nigerian Exchange Group highlighted the need for regulators to maintain a pro-market orientation to enhance accessibility and reform momentum. He noted that debt instruments—once dominated by large corporations—have become increasingly accessible to smaller businesses. He pointed to the more than N1 trillion in commercial papers issued in 2025 as evidence of the market’s expanding relevance for short-term funding.
He attributed this growth largely to regulatory support from the Securities and Exchange Commission, which he described as more market-friendly than in previous years.
The representative from GCR Nigeria underscored the importance of strong corporate governance for SMEs considering debt financing. He explained that credit ratings, which are central to issuing commercial papers or bonds, rely on several pillars: the operating environment, sector resilience, management quality, and the organisation’s financial profile.
He noted that sectors such as banking and telecommunications currently exhibit stronger credit resilience. While young companies may lack a long financial history, he emphasized that disciplined structures and sound governance can significantly improve their ratings. Stable, long-term banking relationships also strengthen a company’s qualitative assessment, whereas abrupt changes in financiers may undermine confidence.
The founder of Payaza Africa offered a practical case study of how his company used the debt market to accelerate growth. He recalled that although equity investors showed interest early on, the company opted for debt because its business model could sustain structured financing. Payaza has since raised over N40 billion through multiple tranches of a commercial paper programme.
During the session, he highlighted his belief that business success rests more on discipline than intellectual strength. He argued that debt enforces rigor, as the obligation to meet interest and principal payments fosters accountability, steady decision-making, and consistent financial planning. According to him, the constant responsibility associated with debt cultivates a culture where timelines are respected and operational focus is sharpened.
He concluded that startups aiming for long-term, sustainable expansion may benefit from the structure and clarity that debt-driven growth models create.
