Nigeria’s small businesses are trapped in a ₦130tn funding crisis
With banks’ lending cautiously and borrowing costs still high, millions of Nigerian MSMEs remain locked out of credit.
Nigeria’s small business sector may be carrying the economy on its back, but access to funding remains one of its biggest problems.
Dele Oye, Chairman of the Alliance for Economic Research and Ethics LTD/GTE, has warned that Nigeria’s more than ₦130 trillion financing gap is crippling the growth of nearly 39 million micro, small and medium enterprises (MSMEs), describing the situation as a deep structural failure within the country’s financial system.
In a statement, Oye said the gap between what Nigerian businesses need and what financial institutions are currently able or willing to provide has become a major obstacle to job creation, productivity, and economic growth.
According to him, while MSMEs account for about 96 percent of businesses in Nigeria, contribute roughly 48 percent of GDP, and provide nearly 84 percent of private sector jobs, access to formal bank credit remains extremely limited for most operators.
“Fewer than one in twenty MSMEs in Africa’s largest economy have access to formal bank credit,” Oye stated.
He argued that many small businesses are now trapped between weak financing options, expensive short-term loans, and informal borrowing systems that make long-term expansion difficult.
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According to Oye, Nigeria’s Development Finance Institutions currently operate with a combined asset base of just above ₦8 trillion, despite MSME financing needs estimated at over ₦130 trillion.
“This is not a funding gap. It is a funding abyss,” he said.
The economist said the current system has created a situation where productive businesses struggle to access capital, while financial institutions increasingly prioritise low-risk returns over lending to smaller enterprises.
He pointed to the Central Bank of Nigeria’s monetary environment as part of the challenge.
“With the CBN’s Monetary Policy Rate standing at 26.50 percent as of February 2026, following a modest reduction from 27.50 percent, and inflation still at 15.69 percent in April 2026, the real cost of capital remains punishing,” he said.
According to him, the Standing Deposit Facility has also encouraged banks to prioritise parking excess liquidity with the CBN rather than expanding lending to businesses considered risky.
Oye noted that Nigeria’s domestic credit to the private sector currently stands at about 17.6 percent of GDP, far below peer economies.
He compared Nigeria’s position with South Africa, where private sector credit exceeds 70 percent of GDP, and Kenya, where it remains above 30 percent.
“For an economy that aspires to be among the world’s top twenty economies by 2050, this is not a gap. It is a chasm,” he stated.
The comments come as the World Bank-backed US$500 million FINCLUDE programme attempts to improve access to finance for Nigerian MSMEs.
Approved in December 2025, the programme is expected to mobilise about US$1.89 billion in private capital and provide debt financing support to around 250,000 businesses, including 150,000 women-led enterprises and 100,000 agribusinesses.
While Oye described the intervention as important, he argued that the programme also exposes deeper weaknesses within Nigeria’s financial system.
“When an economy the size of Nigeria’s requires a multilateral institution to guarantee US$800 million in credit to mobilise domestic capital for its own small businesses, the problem is not risk. The problem is vision, governance, and the systematic misalignment of financial incentives,” he said.
He stressed that external interventions alone cannot solve the scale of Nigeria’s financing crisis.
“The World Bank’s FINCLUDE programme will mobilise $1.89 billion and extend credit to 250,000 MSMEs. That is meaningful progress. But Nigeria has over 39 million MSMEs. The mathematics of external intervention cannot close a gap of that magnitude,” he added.
Oye called for broader reforms involving the Federal Government, the Central Bank of Nigeria, the Bank of Industry, the Bank of Agriculture, NEXIM Bank, and commercial lenders.
He also urged Nigeria’s small business to improve financial documentation, formalise operations, maintain proper tax records, and build stronger banking relationships to improve their chances of accessing credit.
“Nigeria’s 39 million MSMEs are not waiting for another speech,” he said. “They are waiting for a loan.”
