Small business operators in Nigeria are calling for the establishment of specialised banks dedicated to serving micro, small and medium enterprises, citing data that exposes the extent to which the country’s existing credit system is failing the sector. The call was made by Femi Egbesola, National President of the Association of Small Business Owners of Nigeria, who revealed that only 15.47 per cent of Nigerian SMEs access bank loans — and just 3.37 per cent actually draw from available bank loan portfolios.
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The credit reality behind the numbers
The figures Egbesola presented make the credit exclusion problem concrete in a way that aggregate financing gap estimates do not. Of Nigeria’s estimated 40 million MSMEs, fewer than one in six has any relationship with formal bank credit, and fewer than one in 30 has actually received a loan. The Bank of Industry and the Bank of Agriculture already exist as development finance institutions, he acknowledged — but their reach, disbursement speed, and capacity to serve the informal and micro-enterprise segments that generate the majority of small-business employment have been insufficient.
With the CBN holding the Monetary Policy Rate at 26.5 per cent and commercial lending rates climbing above 30 per cent at most institutions, the case for borrowing has become financially irrational for most small businesses. The manufacturing sector is bearing particular pressure, with factory owners warning that the cost of bank loans is frustrating expansion, forcing businesses to delay equipment upgrades, reduce production runs, and abandon growth plans that cannot be made to work at 30-plus per cent interest.
Only 3.37 per cent of Nigerian SMEs drawing from available loan portfolios is not a credit access problem. It is a structural failure in which the formal financial system and the sector it is supposed to serve have become largely disconnected from each other.
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What dedicated SME banks could change
Egbesola’s proposal centres on the argument that the challenges facing small businesses — informal operations, limited documentation, irregular cash flows, and the need for small, frequent disbursements — require institutions specifically engineered around those characteristics, rather than commercial banks applying frameworks built for larger, formally structured borrowers.
Dedicated SME banks, he said, would be structured to benchmark lending against small business realities, eliminate the disbursement delays that have made existing intervention funds frustrating to access, and extend financial services into the informal and production economy that currently accounts for approximately 50 per cent of employment. Without that structural shift, he warned, the deepening financing crisis will continue to threaten investment, production, and job creation across the sector.
The manufacturing dimension
The banking credit decline is not abstract for Nigeria’s manufacturers. Bank credit to the manufacturing sector fell by N1.92 trillion in 2025, dropping from N8.53 trillion in December 2024 to N6.61 trillion by year end — a 22.5 per cent contraction that the Manufacturers Association of Nigeria described as one of the most serious setbacks to Nigeria’s industrialisation drive in recent years. Plants across the country are operating at between 55 and 65 per cent of installed capacity, with power and credit cited as the two most binding constraints.
A sector that employs millions, contributes significantly to GDP, and is central to the government’s diversification agenda is receiving less credit at the end of 2025 than it did at the start — in an environment where the government simultaneously says it wants industrial transformation. That contradiction is what the push for dedicated SME banks is ultimately a response to.
