Despite the federal government’s N1 trillion loan intervention, Nigeria’s 40 million micro, small, and medium enterprises (MSMEs) remain largely shut out of formal credit markets. Only 4 per cent of MSMEs can access bank loans, leaving a staggering 96 per cent excluded, according to a new report by Stears. The financing gap is estimated at $236 billion — roughly the combined GDP of several African countries.
The report, MSME Lending in Nigeria, Ghana and Kenya, warns that structural barriers continue to strangle small businesses, long hailed as the backbone of Nigeria’s economy. “MSMEs remain the lifeblood of Nigeria’s economy, yet only a fraction can obtain financing from banks,” Stears stated. “The $236 billion gap is a crisis demanding urgent, innovative solutions.”
While Kenya and Ghana have leveraged mobile money platforms to expand digital lending, Nigeria remains dominated by commercial banks, even though digital lenders now outnumber them. Access Bank has emerged as a rare exception, expanding its MSME portfolio from 30,000 in 2019 to a projected 700,000 by 2024. Digital finance players such as Moniepoint are also stepping in, leveraging their two-million-agent network and transaction data to roll out tailored credit products for small businesses.
High interest rates are compounding the crisis. Borrowing costs for manufacturers now exceed 37 per cent, prompting the Manufacturers Association of Nigeria (MAN) to warn that such rates are “suffocating industrial capacity.” MAN director-general Segun Ajayi-Kadir, said finance costs for manufacturers surged from N1.43 trillion in 2023 to N2.06 trillion in 2024, a 44 per cent jump that “directly depresses productivity and leads to underutilisation of industrial capacity.” He described the situation as an “economic paradox” where “banks enjoy widening profit margins, while manufacturers contend with shrinking margins, rising debts, and declining productivity.”
Ajayi-Kadir cautioned that the high-interest environment threatens the recently approved ‘Nigeria First’ policy, which mandates all government ministries, departments, and agencies to patronise made-in-Nigeria products. “A nation cannot industrialise on the back of prohibitively expensive credit,” he said. He urged the Central Bank of Nigeria (CBN) to cut benchmark rates and deploy moral suasion to ensure commercial banks offer single-digit concessionary rates to manufacturers. He also called for swift disbursement of the N1 trillion industry support fund, an upward review of the Bank of Industry’s capital base, immediate settlement of $2.4 billion in foreign exchange forward contracts, and a pegged customs duty exchange rate for critical imports.
The Lagos Chamber of Commerce and Industry (LCCI) agreed on the need for measured intervention. Director-general Dr Chinyere Almona, acknowledged that the Monetary Policy Committee’s (MPC) decision to hold the benchmark rate at 27.5 per cent reflected “a balanced approach to avoid inflationary risks.” However, she stressed that private sector development remains stifled under the current rates. “Without affordable financing, MSMEs’ capacity to grow, compete, and contribute to economic development is severely limited,” she said. Almona urged the MPC to implement a forward-guided, data-driven roadmap for future easing, guided by trends in disinflation, FX stability, and credit accessibility. She also highlighted the need for stronger funding for development finance institutions, including the Bank of Agriculture (BoA), NEXIM Bank, and the Bank of Industry (BoI).
Echoing these concerns, the national vice president of the Nigerian Association of Small Scale Industrialists, Segun Kuti-George, said high interest rates stifle business growth and undermine the ‘Nigeria First’ policy. “High borrowing costs directly impact production and raise prices of locally made goods, pushing consumers toward cheaper imports,” he explained. “Over time, declining profits force businesses to downsize or close, increasing unemployment and eroding economic stability.”
Dr Femi Egbesola, President of the Association of Small Business Owners of Nigeria, also warned that the CBN’s high-interest regime undermines the country’s drive to boost local production, reduce import dependence, and strengthen SMEs. “Businesses, especially SMEs and nano enterprises, find it difficult to access funding for expansion, raw materials, and equipment. This stifles innovation and undermines the very foundation of the policy,” he said.
Dr Ifeanyi Okoye, President of the Nigeria Employers’ Consultative Association (NECA), stressed that inconsistent government policies and multiple levies remain major obstacles for small businesses.
Speaking at the NECA MSMEs Fair ’25 in Enugu, he said, “Somebody will come today and say these people will not pay tax; tomorrow, another will say they should start paying. Another will say collect one Naira, and another will say collect three Naira. All these are affecting businesses.”
Okoye described MSMEs as the true drivers of resilience and innovation in the economy, representing over 90 per cent of businesses, employing millions, and contributing significantly to GDP. He called on policymakers, financiers, innovators, and entrepreneurs to join forces in unlocking the sector’s full potential. “Through networking, investments, linkages, policy engagement, and knowledge sharing, NECA is committed to building an enabling environment where businesses can thrive, compete, and sell,” he said.
Analysts warn that unless urgent reforms are implemented — from lowering borrowing costs to supporting digital finance innovation and stabilising policy — Nigeria risks stunting the growth of the sector that employs millions, drives innovation, and underpins economic resilience.
