N130trn credit gap choking 39m MSMEs, threatening growth –Oye

Chairman, Alliance for Economic Research and Ethics LTD/GTE, Dele Oye, has made a blistering submission that Nigeria’s N130 trillion credit deficit is severely constraining the expansion of about 39 million micro, small and medium enterprises (MSMEs).

His remarks add to the growing warnings of experts who noted that the country’s financing structure is fundamentally misaligned with its real economy needs.

Oye described the situation as a deep structural failure in Nigeria’s capital allocation system, arguing that it has become a major drag on jobs creation, productivity and sustainable economic growth.

In a detailed statement, he said that while MSMEs form the backbone of Nigeria’s private sector, accounting for the vast majority of businesses and employment, they remain locked out of affordable formal credit, forcing many to depend on informal lenders or expensive short-term financing that limits their ability to scale.

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.”

He warned that the mismatch reflects a deeper governance and policy problem rather than a temporary liquidity constraint.

Oye further stressed the scale of exclusion in the credit market, saying the situation is far worse than commonly acknowledged.

He 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.”

He pointed to international interventions, including the World Bank’s recent approval in December 2025 of the $500 million Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) programme, which is designed to mobilise about $1.89 billion in private capital and extend credit to 250,000 enterprises.

The scheme targets at least 150,000 women-led businesses and 100,000 agribusinesses, but Oye said even such large-scale external support only underscores the depth of Nigeria’s internal financing failure.

He noted, “The World Bank’s approval 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.”

Oye also highlighted macroeconomic conditions that continue to discourage lending to the real sector. With the Central Bank of Nigeria’s Monetary Policy Rate at 26.50% as of February 2026, following a slight cut from 27.50%, and inflation at 15.69% in April 2026, he said the cost of capital remains prohibitively high for productive investment.

He explained that banks have little incentive to extend credit to small businesses when safer returns are available through government-backed instruments and central bank facilities.

He stated, “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.”

As a result, Nigeria’s domestic credit to the private sector has remained weak at about 17.6% of GDP, far below peer economies such as South Africa, above 70%, and Kenya, above 30%.

He warned that this positions Nigeria alongside some of the least financially developed economies globally, despite its size and ambition.

Oye also called for urgent reforms within the financial system, insisting that commercial banks must build stronger SME lending capacity through improved risk assessment tools, sector expertise and technology-driven credit scoring models.

He criticised the underuse of the National Collateral Registry, arguing that movable asset financing remains largely ignored despite its importance to SME credit expansion.

At the same time, he urged businesses to become more formalised and credit-ready by maintaining verifiable records, paying taxes, and building structured banking relationships that can support lending decisions.

Oye concluded that while external programmes such as FINCLUDE are helpful, they are insufficient to close a financing gap of Nigeria’s scale.

He stated, “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.”

He argued that only deep structural reforms, ranging from monetary policy adjustments to stronger development finance institutions and improved banking practices, can unlock sustainable credit flow to the real economy.

According to him, “Nigeria’s 39 million MSMEs are not waiting for another speech. They are waiting for a loan.”