The Chairman of the Alliance for Economic Research and Ethics LTD/GTE, Dele Oye, has said that Nigeria’s over ₦130 trillion credit deficit is stifling the growth of 39 million micro, small and medium enterprises (MSMEs) across the country.
Oye, in a statement, said the widening gap between the financing needs of small businesses and the capacity of Nigeria’s financial system represents a “structural failure” in capital allocation, describing the situation as a major constraint on jobs, productivity and long-term economic growth.
He noted that despite MSMEs accounting for the bulk of businesses and a significant share of employment in Nigeria, access to formal credit remains extremely limited, forcing many operators to rely on informal funding sources or expensive short-term borrowing that restricts expansion.
According to him, “Nigeria operates a network of Development Finance Institutions (DFIs) whose combined total asset base is slightly above N8 trillion naira against a development finance requirement for MSMEs alone estimated at over N130 trillion naira. This is not a funding gap. It is a funding abyss.”
Oye further stated, “Let us begin with a number that should shame every policymaker, every bank board, and every development finance executive in Nigeria: fewer than one in twenty MSMEs in Africa’s largest economy have access to formal bank credit. In a nation where micro, small, and medium enterprises account for 96% of all businesses, 48% of GDP, and 84% of private sector employment, this is not a market imperfection. It is a structural catastrophe.
“The World Bank’s approval, in December 2025, of the $500 million to Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) programme designed to mobilise $1.89 billion in private capital and extend debt financing to 250,000 enterprises, including at least 150,000 women-led businesses and 100,000 agribusinesses is a welcome and necessary intervention. But it is also a confession. When an economy the size of Nigeria’s requires a multilateral institution to guarantee $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.
“This paper diagnoses the architecture of that failure and prescribes a set of reforms that are, in equal measure, urgent, achievable, and long overdue.”
He continued: “Nigeria’s macroeconomic environment has, for the better part of two years, constructed a perfectly rational case for commercial bank inertia. With the CBN’s Monetary Policy Rate (MPR) standing at 26.50% as of February 2026 following a modest 50-basis-point reduction from the peak of 27.50% and headline inflation at 15.69% as of April 2026, the real cost of capital remains punishing.
“The Standing Deposit Facility (SDF), through which commercial banks park excess liquidity with the CBN overnight, has offered risk-free returns calibrated to the MPR corridor. When a bank can earn a near-riskless return by doing nothing, the incentive to underwrite a Lagos market trader or a Kano agro-processor evaporates entirely. This is not banker greed. This is banker arithmetic. And until policymakers change the arithmetic, the speeches about financial inclusion will remain precisely speeches.
“The consequence is visible in the data. Nigeria’s domestic credit to the private sector stands at approximately 17.6% of GDP, a figure that places Africa’s largest economy in the company of the world’s most financially underdeveloped nations. South Africa’s comparable ratio exceeds 70%. Kenya’s exceeds 30%. Even the Sub-Saharan African average, excluding South Africa and Nigeria, surpasses Nigeria’s ratio. For an economy that aspires to be in the top twenty globally by 2050, this is not a gap, it is a chasm.”
He further charged that “Commercial banks must invest in SME underwriting capability, hiring sector specialists, building cash-flow scorecards for agro-processing, logistics, and trade, and deploying AI driven document review and early-warning systems. The National Collateral Registry, established in 2016, remains chronically underutilised because banks treat movable-asset lending as optional. It is not optional; it is the future of SME finance in a capital-scarce economy.
“The enterprise sector must meet the system halfway. Open verifiable bank accounts, file taxes, maintain audited records, and register assets. Build banking relationships beforecredit is needed. A transactional history is the cheapest collateral available. And leverage government contracts and purchase orders as credit assets: assign them, discount them, and collateralise them.”
Oye concluded, “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, however generously structured, cannot close a gap of that magnitude.
“The solution must be domestic, structural, and permanent. It requires a Federal Government that borrows less and fixes inflation’s structural drivers; a CBN that stops rewarding liquidity parking over productive lending; a BOI that returns to its single-digit mandate without equivocation; a BOA that is rescued from insolvency and rebuilt as a credible agricultural financier; a NEXIM that is capitalised to match Nigeria’s export ambitions; commercial banks that build the underwriting infrastructure to see MSMEs clearly; and enterprises that formalise and meet the system halfway.
“The 8-point Renewed Hope Agenda of President Tinubu is a statement of intent. The question before every institution named in this analysis is whether that intent will be translated into the granular, unglamorous, technically demanding work of credit market reform or whether it will remain a set of aspirational bullet points on a government slide deck. Nigeria’s 39 million MSMEs are not waiting for another speech. They are waiting for a loan.”
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