For a decade, Nigeria’s “engine of growth” has been running on an empty tank. A startling analysis of Central Bank of Nigeria (CBN) data from 2014 to 2023 reveals that Small and Medium Enterprises (SMEs) secured a mere 0.51% of total private sector credit.
While the private sector received a staggering ₦199.63 trillion in total loans over the ten-year period, the nation’s 41 million small businesses were left to fight over a relatively tiny ₦1.01 trillion.
A Decade of Marginalization
The credit flow to SMEs has not only been low but highly volatile, reflecting a banking system that remains deeply hesitant to fund small-scale industry.
The Lending Timeline:
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2014: A modest start at 0.88% (₦116.07 billion).
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2015: A near-total collapse to 0.02% (₦2.95 billion).
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2023: A decade-high peak of 1.18% (₦465.37 billion).
Despite the slight uptick in 2023, the gap remains cavernous. PricewaterhouseCoopers (PwC) estimates Nigeria’s MSME financing deficit at a massive ₦48 trillion, dwarfing the current levels of formal bank support.
High Costs, Short Leashes
The barrier to entry for small businesses isn’t just a lack of funds; it’s the “cost of capital.” Even when loans are available, the terms are often prohibitive:
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Interest Rates: Frequently exceeding 30%, making it nearly impossible for low-margin startups to turn a profit.
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Loan Tenors: Most commercial loans are restricted to under three years, preventing SMEs from investing in long-term infrastructure or advanced technology.
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The “Savings” Reliance: According to SMEDAN, 79% of MSMEs are forced to rely on personal savings to survive, stifling their ability to scale.
Are Intervention Agencies Enough?
While the Bank of Industry (BOI) and Development Bank of Nigeria (DBN) have stepped in, the scale of their impact is under scrutiny. The BOI’s 2024 report shows that only 15.3% of its disbursements actually reached MSMEs, with the majority of funding still flowing toward large-scale industrial players.
Analysts argue that Nigeria’s current industrial strategy is “top-heavy,” favoring a few large conglomerates while leaving the broader ecosystem of input suppliers and local producers underfunded.
The Call for an “SME-First” Industrial Strategy
Amaka Nwaokolo, Director of The FATE Institute, asserts that Nigeria’s path to industrial renewal must be built from the bottom up. She argues that the 41 million NMSMEs should not be treated as a “charity case” but as the core of the national strategy.
“Nigeria must move from merely supporting small firms to placing them at the core of the country’s industrial strategy,” Nwaokolo stated.
By empowering these firms to act as primary producers and suppliers to larger industries, Nigeria could bridge the production gap, reduce import dependence, and create a more resilient, broad-based economy.
