Nigeria’s manufacturers, farmers, and other productive enterprises are contending with deepening financing challenges as high borrowing costs, short loan tenors, and stringent collateral requirements continue to restrict access to credit, according to the Centre for the Promotion of Private Enterprise (CPPE).
In a recent policy brief on development finance, the economic think tank warned that the country’s real sector faces a structural financing deficit estimated at over ₦50 trillion—a gap that undermines investment, industrial expansion, agricultural productivity, and export growth.
The CPPE noted that manufacturing, agriculture, agribusiness, micro, small and medium enterprises (MSMEs), and export-oriented businesses remain significantly underserved by the financial system, despite their critical role in driving economic growth. It attributed this persistent problem to prohibitive lending rates, inadequate long-term financing, limited risk appetite among commercial banks, and excessive collateral requirements.
According to the organisation, agriculture contributes more than one-fifth of Nigeria’s Gross Domestic Product but has historically received less than five per cent of banking sector credit. Manufacturers, it added, require long-term funding for machinery, factory expansion, technology upgrades, energy infrastructure, and backward integration—investments that cannot be sustained through expensive, short-term commercial bank loans.
The CPPE further argued that the current monetary environment has intensified the financing crisis. With the Monetary Policy Rate at 26.5 per cent and the Cash Reserve Requirement for deposit money banks at 45 per cent, commercial lending rates are increasingly incompatible with the expected returns on productive investments.
While acknowledging the Central Bank of Nigeria’s efforts to restore monetary policy credibility, stabilise the exchange rate, and moderate inflation, the organisation maintained that monetary stability should be balanced with policies that support investment, productivity, and job creation.
The policy brief argued that commercial banks alone cannot finance Nigeria’s industrialisation, as they largely rely on short-term deposits, whereas manufacturers and agribusinesses require financing that spans five to ten years or more. The CPPE also cited information asymmetry, excessive reliance on landed property as collateral, and the crowding-out effect of government borrowing as key factors limiting credit to the productive sector.
Rather than abandoning development finance, the CPPE called for comprehensive reform of the framework. Recommendations include recapitalising development finance institutions such as the Bank of Industry and the Bank of Agriculture, expanding credit guarantee schemes, establishing specialised long-term refinancing windows for manufacturing and agriculture, mobilizing pension and insurance funds for productive investments, and strengthening governance and transparency in intervention programmes.
The organisation argued that a transparent, rules-based development finance architecture would help bridge Nigeria’s financing gap without undermining the Central Bank’s price stability mandate. It added that increasing financing for productive sectors would expand domestic production, improve food security, create jobs, and ease structural inflation over the long term.
CPPE concluded that Nigeria’s real sector financing deficit is too significant to be addressed solely through conventional commercial banking, urging policymakers to adopt a balanced approach that combines monetary discipline with targeted, market-correcting development finance interventions.
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