SMEs Face N48tn Financing Gap Despite Bank Reforms – Report
The Centre for the Promotion of Private Enterprise (CPPE) has warned that Nigeria’s small and medium enterprises (SMEs) face a ₦48tn financing gap, despite recent banking sector reforms.
A policy brief released Sunday noted that SME credit accounts for only 1% of total lending, compared to about 5% in sub-Saharan Africa, even though SMEs contribute 50% of GDP and over 80% of employment.
CPPE Director Dr. Muda Yusuf acknowledged that the Central Bank of Nigeria’s recapitalisation exercise has strengthened banks, but said the benefits have not translated into meaningful support for the real economy.
“The evidence suggests that this linkage remains weak,” the report stated.
The brief highlighted that private-sector credit stood at 17% of GDP in 2025, far below the regional average of 25% and 34% for lower-middle-income countries. Peer economies like South Africa, Mauritius, and Cape Verde have significantly higher levels of financial intermediation.
It also flagged weaknesses in consumer credit, which accounts for just 7% of total lending, compared to 15–25% in other African countries, limiting domestic demand and growth.
Structural imbalances were noted, with 55% of lending short-term (under one year) and only 25% long-term (over three years), misaligned with the financing needs of manufacturing, agriculture, infrastructure, and real estate.
Sectoral distribution remains skewed, with 55% of credit going to services, compared to 14% for manufacturing and 5% for agriculture.
CPPE attributes this to government borrowing crowding out private lending, high interest rates, and stringent collateral requirements.
The group recommended raising private-sector credit to 30% of GDP, de-risking SME lending through credit guarantees, incentivising long-term financing, and ensuring monetary policy reforms translate into increased lending.
“Nigeria needs not just stronger banks, but banks that work for the economy,” the brief concluded.
