Small and medium-sized enterprises in Nigeria are grappling with an estimated ₦48tn financing gap, as limited access to credit continues to constrain growth despite ongoing banking sector reforms, a new policy brief has revealed.
The report, issued by the Centre for the Promotion of Private Enterprise, highlighted that credit to SMEs accounts for only about one per cent of total lending in the country—far below the sub-Saharan African average of five per cent.
Brandspur Banking News Desk reports that the development is particularly concerning given the critical role SMEs play in Nigeria’s economy, contributing roughly 50 per cent to Gross Domestic Product and employing more than 80 per cent of the workforce.
The organisation noted that while the ongoing bank recapitalisation exercise by the Central Bank of Nigeria has strengthened financial system stability, the impact has yet to translate into meaningful support for businesses operating in the real sector.
According to the report, 32 banks have met the new minimum capital requirements as of late March 2026, with the process described as orderly and non-disruptive, as it recorded no depositor losses, forced mergers, or job cuts.
Despite this progress, broader indicators show weak credit delivery across the economy. Private-sector credit stood at about 17 per cent of GDP in 2025, significantly below the 25 per cent average for sub-Saharan Africa and 34 per cent for lower-middle-income economies.
The CPPE also pointed to structural imbalances in Nigeria’s credit system, noting that about 55 per cent of total lending is short-term, with durations of less than one year, while only a quarter qualifies as long-term financing exceeding three years—an imbalance that limits investment in key sectors such as manufacturing, agriculture, infrastructure, and real estate.
Sectoral allocation remains uneven, with the services sector receiving the bulk of credit at approximately 55 per cent, compared to 14 per cent for manufacturing and just five per cent for agriculture, further widening the gap between financial institutions and productive sectors.
In addition, consumer credit remains underdeveloped at around seven per cent of total lending, compared to between 15 and 25 per cent across sub-Saharan Africa, a trend the group said is dampening domestic demand and slowing economic expansion.
The report attributed the persistent credit constraints to several factors, including high interest rates, tight monetary policy, stringent collateral requirements, and the crowding-out effect of government borrowing, which limits funds available to the private sector.
To address these challenges, the CPPE called for targeted reforms aimed at boosting financial intermediation and strengthening the link between banks and the real economy. It recommended raising private-sector credit to at least 30 per cent of GDP in the medium term, alongside measures such as credit guarantees for SMEs, improved credit infrastructure, and policies to encourage long-term lending.
The group also urged policymakers to promote balanced sectoral credit allocation, expand access to consumer financing, and ensure that monetary policy adjustments translate into increased lending to businesses.
It stressed that while recapitalisation has enhanced banks’ resilience, the ultimate success of the reform would depend on its impact on economic growth, job creation, and enterprise development.
“The priority must shift from capital adequacy to economic impact,” the report stated, adding that Nigeria needs a banking system that actively supports investment and drives sustainable economic transformation.
