NICA Calls for ₦2 Trillion Injection Into Credit Guarantee Company to Expand Access to Finance

₦2tn Credit Guarantee Injection Could Unlock More Business Financing, NICA Says

The National Institute of Credit Administration (NICA) has called on the Federal Government to inject ₦2 trillion into the National Credit Guarantee Company (NCGC) to expand access to credit for businesses and productive sectors of the Nigerian economy.

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NICA Registrar and Chief Executive Officer, Prof. Chris Onalo, made the call in a statement, arguing that stronger credit guarantees could help de-risk lending and encourage financial institutions to extend more funding to businesses, particularly micro, small and medium-sized enterprises (MSMEs).

NICA Seeks ₦2 Trillion Capitalisation

NICA wants the Federal Government to provide ₦2 trillion in capital for the NCGC, which was established to support lending by providing guarantees that reduce the risks faced by financial institutions.

Onalo said the proposed capitalisation would enable the company to provide broad-based guarantees that could encourage banks and other lenders to finance businesses with viable projects but limited access to conventional credit.

The proposal comes amid continued concerns about the cost and availability of credit for businesses operating in Nigeria.

Credit Guarantees Could Reduce Lending Risks

Credit guarantee schemes work by sharing part of the risk associated with lending. Where a borrower defaults, the guarantee can provide a level of protection to the lender, depending on the terms of the arrangement.

NICA argues that a well-capitalised NCGC could therefore give financial institutions greater confidence to lend to businesses that may struggle to meet conventional collateral requirements.

Onalo said the government needs to create mechanisms that de-risk lending and encourage banks to finance businesses capable of increasing production and creating jobs.

Focus on MSMEs and Productive Sectors

A major focus of the proposal is micro, small and medium-sized businesses, which play a significant role in economic activity but often face difficulties accessing formal credit.

NICA said the proposed guarantee scheme could serve as a bridge between stronger financial institutions and businesses requiring additional financing to expand their operations.

Improved access to credit could support investment in equipment, working capital, expansion and job creation across productive sectors.

Housing and Real Estate Could Also Benefit

Although NICA's proposal targets the broader economy, a stronger credit guarantee framework could have implications for Nigeria's housing and construction sectors.

Housing development requires significant upfront capital for land acquisition, infrastructure, materials and construction. Limited access to affordable long-term financing remains one of the challenges affecting the ability of developers to deliver homes at scale.

A stronger credit guarantee system could potentially encourage lenders to finance viable housing-related businesses and projects where perceived credit risks currently limit lending.

For smaller developers and construction businesses, improved access to finance could also support the acquisition of equipment, purchase of building materials and completion of projects.

Credit Access Remains a Constraint on Investment

The call also highlights the wider challenge of financial intermediation in Nigeria.

Businesses need credit to invest and expand, but high borrowing costs, collateral requirements and perceived lending risks can restrict access to financing.

When businesses cannot obtain affordable funding, investment and production capacity can remain below potential.

NICA's proposal seeks to address part of this problem by shifting some of the lending risk away from individual financial institutions through a government-backed guarantee structure.

Stronger Oversight Will Be Important

A ₦2 trillion capitalisation would represent a significant public financial commitment, making governance and risk management critical to the success of the proposed scheme.

A credit guarantee programme would need clear eligibility requirements, transparent underwriting standards, effective monitoring and strong mechanisms for managing claims.

Without adequate oversight, guarantee schemes can expose public resources to significant risks.

The effectiveness of the proposed capitalisation would therefore depend not only on the amount committed but also on how efficiently the funds are deployed and how effectively the NCGC manages the associated risks.

Potential Impact on Investment and Economic Activity

NICA's proposal comes as stakeholders continue to seek ways to channel more financing towards productive economic activity.

Greater availability of credit could support business expansion, increase investment and strengthen employment generation.

For the real estate sector, improved access to finance could also help address one of the constraints on housing supply by making funding more accessible to developers and construction businesses.

However, the impact on housing delivery would depend on whether financial institutions extend guarantees to the sector and whether developers can access financing at rates and tenors that support viable projects.

Need to De-Risk Long-Term Financing

The proposal also reinforces the importance of developing financial instruments capable of supporting longer-term investment.

Housing, infrastructure and other capital-intensive sectors require financing structures that match the extended periods over which projects generate returns.

Short-term and expensive credit can increase project costs and make affordable housing more difficult to deliver.

A properly structured guarantee mechanism could help lenders become more comfortable with longer-term lending, although broader reforms to interest rates, land administration and project risk would still be necessary.

Outlook

NICA's call for a ₦2 trillion injection into the National Credit Guarantee Company reflects the continuing push to expand access to finance and reduce lending risks in Nigeria. The institute believes a stronger guarantee system could encourage banks to provide more credit to MSMEs and other productive sectors.

For Nigeria's housing and construction sectors, improved credit access could support developers and businesses that face financing constraints. However, the effectiveness of the proposed intervention will depend on transparent governance, prudent risk management and the ability of the credit guarantee system to translate public capital into affordable and sustainable private-sector lending.

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