In Nigeria, running a business is like sprinting uphill with a boulder strapped to your back — and the boulder is the financial system itself.
The country’s productive economy is locked in a “cash and carry” culture, where immediate payments dominate and credit remains rare, expensive, and risky. In developed economies, the financial value chain — from capital sourcing to resource allocation — acts as an engine for growth. In Nigeria, it behaves more like a toll gate, extracting high costs without adding much value.
Punishing Costs, Stalled Growth
The numbers tell a grim story:
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Central Bank MPR: 27.50% (July 31, 2025) — held steady for three consecutive meetings.
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Borrowing reality: ~30% interest from commercial banks, ~50% from microfinance, and as high as 120% from informal lenders.
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Global context: Japan 0.10%, Switzerland 1.25%, South Korea 3.50%, Canada 5.00%, UK 5.25%.
With costs like these, credit is no longer a growth tool — it’s a survival gamble.
When Banking Becomes a Transaction, Not a Partnership
Banks and fintechs have made payments faster and more convenient with ATMs, mobile apps, and online banking. But these tools don’t help a manufacturer buy new machinery, a farmer expand planting, or a processor survive high energy bills. The focus is on moving money, not on building businesses.
Short-term loans dominate — often too short for a business cycle to yield profits before repayment is due. High interest, multiple taxes, crippling electricity costs (₦229/kWh for Band A), and spiralling logistics expenses all combine to create an environment where credit can accelerate failure, not success.
The Human Cost of a Broken System
When borrowers default — often due to unrealistic repayment structures — their names get blacklisted on credit bureaus, effectively locking them out of formal finance.
Bank staff, under pressure to stick to rigid Prudential rules, avoid flexible arrangements that could keep businesses afloat. Relationship management takes a back seat to risk avoidance, leaving entrepreneurs stranded in an increasingly hostile environment.
Fixing the Value Chain Before It Breaks Completely
Nigeria’s financial system must stop behaving like a high-cost payment processor and start acting like a growth partner. That means:
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Incentivising medium- to long-term lending.
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Providing affordable credit to manufacturers and processors.
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Embedding financial education into banking services.
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Balancing prudential compliance with client support.
If the productive sector collapses under the weight of its own financing, it won’t be for lack of entrepreneurs — it will be because the system designed to fund them became their biggest obstacle.
