World Bank: Fewer Than One in 20 Nigerian SMEs Can Access Bank Credit

World Bank flags Nigeria’s SME financing gap

Nigerian micro, small and medium-sized enterprises (MSMEs) remain largely excluded from formal bank financing, with fewer than one in 20 businesses able to access bank credit, according to the World Bank.

Speaking at the 19th Banking and Finance Conference of the Chartered Institute of Bankers of Nigeria (CIBN) in Abuja, World Bank Country Director for Nigeria, Matthew Verghis, said the financing gap remains a major constraint on job creation and private-sector growth. He also called for stronger infrastructure projects capable of attracting private capital to Nigeria's estimated $100 billion annual infrastructure financing requirement.

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World Bank Identifies ‘Missing Middle’ in SME Financing

Verghis described many Nigerian MSMEs as part of a “missing middle” in the country's financial system. These businesses are often too large for microfinance facilities but remain too small or risky for conventional commercial bank lending.

The World Bank said fewer than one in 20 MSMEs currently access bank credit, while about nine in 10 operate informally. This limits their ability to obtain the capital required to expand production, purchase equipment, employ more workers and build sustainable businesses.

The financing challenge is particularly significant because MSMEs account for a large share of economic activity and employment. Limited access to formal credit therefore affects not only individual businesses but also Nigeria's broader capacity to generate jobs.

Private-Sector Credit Has Increased

The World Bank's assessment comes as private-sector credit has continued to expand.

According to recent Central Bank of Nigeria data cited in the report, credit to the private sector reached ₦83.43 trillion in July 2026, compared with ₦80.59 trillion in April. However, the World Bank argued that the increase in overall credit has not translated into sufficient financing for sectors with high employment potential.

Domestic credit to the private sector stands at about 13 per cent of GDP, according to Verghis. Agriculture receives approximately 6 per cent of total credit, while MSMEs receive roughly 1 per cent.

The figures highlight the difference between the expansion of aggregate credit and the availability of financing to smaller productive businesses.

Banking Sector Has More Capital

The World Bank's argument is not that Nigeria lacks financial resources.

Verghis said Nigeria's banking system holds about $160 billion in assets, following the recent recapitalisation exercise that generated approximately $3.4 billion in additional capital. Pension and insurance assets provide another $26.5 billion, while global institutional investors control a much larger pool of capital seeking viable investment opportunities.

The challenge, therefore, is increasingly one of capital allocation.

The World Bank wants a greater proportion of available capital directed towards productive activities capable of generating employment, increasing business capacity and supporting long-term economic growth.

High Financing Barriers Continue to Affect Businesses

Access to bank finance remains difficult for many Nigerian businesses because of the cost and structure of available loans.

The World Bank has previously identified high borrowing costs, short loan tenors and collateral requirements as significant barriers to MSME financing. Women-led businesses and agribusinesses face additional difficulties in accessing suitable financial products.

These constraints can make it difficult for businesses to finance machinery, working capital, expansion and other investments that require longer repayment periods.

The problem is particularly important for businesses that have viable operations but lack sufficient fixed assets to satisfy conventional collateral requirements.

World Bank Calls for Blended Finance

To improve access to finance, the World Bank is advocating greater use of blended-finance mechanisms.

These include partial credit guarantees, first-loss structures and risk-sharing arrangements that can reduce the risks faced by commercial lenders and encourage them to finance businesses that would otherwise struggle to qualify for conventional loans.

The Bank's $500 million Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) programme is already designed to expand access to finance for smaller businesses. The programme was approved in December 2025 and is intended to use public resources to attract additional private-sector capital rather than replace commercial financing.

The financing package comprises a $400 million loan from the International Bank for Reconstruction and Development and a $100 million credit from the International Development Association. The Development Bank of Nigeria is responsible for implementation, with credit guarantees provided through its subsidiary, Impact Credit Guarantee Limited.

Infrastructure Also Requires Private Capital

The World Bank's concerns extend beyond SME lending.

Verghis said Nigeria needs about $100 billion annually to close its infrastructure financing gap, with energy and transport expected to account for almost 60 per cent of the requirement. The National Integrated Infrastructure Master Plan estimates long-term infrastructure investment needs at approximately $2.3 trillion.

The World Bank said Nigeria needs to develop a stronger pipeline of bankable infrastructure projects that can attract pension funds, insurance companies and other institutional investors.

That would require stronger project preparation, corporate governance and investment structures capable of meeting the requirements of long-term institutional investors.

Implications for Housing and Real Estate

The financing gap has implications for Nigeria's housing and property sectors.

Small businesses are important participants in the construction and real estate value chain, ranging from building-material suppliers and artisans to contractors, property maintenance firms, estate agencies and smaller developers.

Limited access to affordable working capital can therefore constrain their ability to purchase materials, retain workers, acquire equipment and execute projects.

The wider infrastructure financing gap also affects housing development. Better access to long-term capital for transport, energy and other infrastructure can improve the conditions required for new residential and commercial developments to emerge.

For property investors and developers, stronger infrastructure financing can improve connectivity and economic activity around emerging locations, while more accessible SME finance can strengthen the businesses that support local property markets.

Banks Face Pressure to Redirect Lending

The World Bank also warned that Nigerian banks may need to adjust their lending strategies as economic conditions change.

As inflation declines and yields on government securities come under pressure, banks may have less incentive to rely heavily on government debt instruments for returns. The World Bank argued that this creates an opportunity to redirect more capital towards productive businesses and other job-creating sectors.

This shift could become increasingly important as Nigeria seeks to translate recent macroeconomic improvements into broader private-sector activity.

The World Bank said Nigeria's reforms, including petrol subsidy removal, foreign-exchange unification and tax reforms, have contributed to improving economic stability. However, it stressed that the next phase must focus on converting that stability into employment, enterprise expansion and inclusive economic growth.

Outlook

The World Bank's assessment highlights a significant gap between the strength of Nigeria's financial system and the ability of smaller businesses to access capital.

With fewer than one in 20 MSMEs accessing bank credit, increasing the flow of finance to productive businesses will remain important to job creation, investment and economic expansion. For the housing and construction sectors, improved SME financing could also strengthen the smaller contractors, suppliers and service providers that form an important part of the property development ecosystem.

The effectiveness of initiatives such as FINCLUDE will ultimately depend on whether guarantees and other financing mechanisms translate into longer-term, affordable credit reaching viable businesses across the country.

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