The Attitude of Small and Medium Industrialists to Venture Capital Financing in Nigeria

The principal objective of this paper is to ascertain the extent to which Myers’ Pecking Order Theory (POT) of business financing explains the financial structure of Small and Medium Manufacturing Enterprises (SMEs) in Nigeria. The goal is to examine their attitude with regard to the venture capital financing known as Small and Medium Enterprises Equity Investment Scheme (SMEEIS) introduced by the government in 1999. The data employed were from the database of the survey of manufacturing SME’s in Nigeria. The findings provide evidence suggesting Pecking Order financing behavior is prevalent among manufacturing SMEs in Nigeria. A small proportion of SMEs that consider equity financing for both business start-up and expansion is found. Hence, equity financing through venture capital has not become as popular as other financing alternative in Nigeria. Debt financing appears to dominate their preference, apart from their personal saving and retained earning. Consequently, the paper suggests policy formulation that will address the mindset of the people and encourage greater commitment of banks to actually undertake promotional activities. Among such activities suggested are the identification, development and packaging of viable industries with enterprising customers, and readiness to provide the complementary services to ensure their success.