The Chairman of the Alliance for Economic Research and Ethics LTD/GTE, Dele Oye, has said that Nigeria’s over N130 trillion credit deficit is stifling the growth of about 39 million micro, small and medium enterprises (MSMEs), warning that the country’s financial system has failed to support productive businesses.

In a statement, Oye described the widening gap between the financing needs of small businesses and the capacity of Nigeria’s financial institutions as a “structural failure” in capital allocation, saying it has become a major obstacle to job creation, productivity and long-term economic growth.

He said that although MSMEs account for most businesses and a significant share of employment in Nigeria, access to formal credit remains extremely low, forcing many operators to depend on informal funding sources or expensive short-term loans that limit business expansion.

According to him, “Nigeria operates a network of Development Finance Institutions (DFIs) whose combined total asset base is slightly above N8 trillion against a development finance requirement for MSMEs alone estimated at over N130 trillion. This is not a funding gap. It is a funding abyss.”

Oye added: “Let us begin with a number that should shame every policymaker, every bank board, and every development finance executive in Nigeria: fewer than one in twenty MSMEs in Africa’s largest economy have access to formal bank credit. In a nation where micro, small, and medium enterprises account for 96 per cent of all businesses, 48 per cent of GDP, and 84 per cent of private sector employment, this is not a market imperfection. It is a structural catastrophe.”

He described the World Bank’s approval of the $500 million Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) programme in December 2025 as a welcome intervention, noting that the initiative is expected to mobilise $1.89 billion in private capital and extend debt financing to 250,000 enterprises, including 150,000 women-led businesses and 100,000 agribusinesses.

However, he argued that the intervention also exposes deeper weaknesses within Nigeria’s financial system.

“When an economy the size of Nigeria’s requires a multilateral institution to guarantee $800 million in credit to mobilise domestic capital for its own small businesses, the problem is not risk. The problem is vision, governance, and the systematic misalignment of financial incentives,” he said.

He stated that the country’s macroeconomic environment has encouraged commercial banks to avoid lending to small businesses.

He said: “With the CBN’s Monetary Policy Rate standing at 26.50 per cent as of February 2026, following a modest 50-basis-point reduction from the peak of 27.50 per cent and headline inflation at 15.69 per cent as of April 2026, the real cost of capital remains punishing.”

According to him, the Standing Deposit Facility, through which banks keep excess liquidity with the Central Bank of Nigeria overnight, has created an incentive structure that favours risk-free returns over productive lending.

Oye noted that Nigeria’s domestic credit to the private sector stands at about 17.6 per cent of GDP, which he said places the country among the world’s most financially underdeveloped economies.

He compared the figure with South Africa’s ratio of over 70 per cent and Kenya’s above 30 per cent, adding that even the Sub-Saharan African average excluding South Africa and Nigeria is higher than Nigeria’s level.

“For an economy that aspires to be in the top twenty globally by 2050, this is not a gap, it is a chasm,” he said.

The economist called on commercial banks to strengthen their SME lending systems by investing in underwriting capacity, hiring sector specialists and deploying technology-driven risk management tools.

He also urged businesses to improve their financial records and formalise operations to improve access to credit.

“The enterprise sector must meet the system halfway. Open verifiable bank accounts, file taxes, maintain audited records, and register assets. Build banking relationships before credit is needed,” he said.

Oye stressed that while the World Bank-backed FINCLUDE programme would provide support for thousands of businesses, the scale of Nigeria’s MSME financing challenge requires broader domestic reforms.

“The World Bank’s FINCLUDE programme will mobilise $1.89 billion and extend credit to 250,000 MSMEs. That is meaningful progress. But Nigeria has over 39 million MSMEs. The mathematics of external intervention, however generously structured, cannot close a gap of that magnitude,” he stated.

He called for reforms across key government institutions, including the Federal Government, the Central Bank of Nigeria, the Bank of Industry, the Bank of Agriculture and the Nigerian Export-Import Bank, alongside stronger participation from commercial banks and enterprises.

Referring to President Bola Tinubu’s Renewed Hope Agenda, Oye said the challenge now is whether the government and relevant institutions would undertake the “technically demanding work of credit market reform.”

“Nigeria’s 39 million MSMEs are not waiting for another speech. They are waiting for a loan,” he added.