The Centre for the Promotion of Private Enterprise (CPPE) has raised a significant alarm over the persistent stagnation of credit flows to Nigeria’s small business sector, revealing that Small and Medium Enterprises (SMEs) receive less than one percent of total banking credit. In a policy brief released on Sunday, the think tank noted that this figure is strikingly low compared to the five percent average across sub-Saharan Africa. This financing gap is particularly troubling given that SMEs contribute approximately 50 percent of Nigeria’s Gross Domestic Product and account for over 80 percent of national employment, yet they face an estimated financing shortfall of ₦48 trillion.
While the CPPE, led by economist Dr. Muda Yusuf, commended the Central Bank of Nigeria for an orderly and non-disruptive bank recapitalization exercise, it warned that stronger balance sheets have not yet translated into meaningful support for the productive economy. As of March 27, 2026, 32 banks had already met the new minimum capital requirements without depositor losses or forced mergers. However, the group stressed that the linkage between a strengthened financial system and the real economy remains weak, with private-sector credit standing at just 17 percent of GDP far below the sub-Saharan average of 25 percent.
The policy brief highlighted several structural imbalances that hinder economic growth. Consumer credit remains weak at only seven percent of total lending, which constrains domestic demand. Furthermore, the maturity profile of available credit is largely mismatched with industrial needs; about 55 percent of total lending is short-term with maturities of less than one year, while only 25 percent qualifies as long-term credit exceeding three years. This pattern fails to support the capital-intensive needs of manufacturing, agriculture, and infrastructure.
Sectoral distribution also remains heavily skewed, with the services sector capturing 55 percent of total credit, leaving manufacturing with 14 percent and agriculture with a mere five percent. The CPPE attributed this disconnect to several systemic factors, including the “crowding-out” effect caused by heavy government borrowing, high interest rates, and stringent collateral requirements that deter lending to smaller, perceived high-risk entities.
To bridge this gap, the CPPE urged authorities to prioritize the next phase of reform by deepening financial intermediation. The group recommended raising private-sector credit to at least 30 percent of GDP in the medium term and implementing credit guarantee schemes to de-risk SME lending. Other proposed measures include incentivizing long-term financing, promoting balanced sectoral credit allocation, and strengthening monetary policy transmission to ensure that interest rate adjustments actually reach the productive sectors.
The organization concluded that the ultimate success of the recent banking reforms will be determined not just by the size of bank balance sheets, but by their impact on investment and job creation. The brief emphasized that at this critical juncture, the priority must shift from capital adequacy to economic impact, asserting that Nigeria requires a banking system that actively works for the broader economy.
