The World Bank has approved a $500 million loan facility to expand access to finance for micro, small and medium enterprises in Nigeria. The approval, confirmed today, represents a major intervention aimed at improving credit availability for businesses that form the backbone of the Nigerian economy.
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Details of the funding package
The funding was approved under the Fostering Inclusive Finance for MSMEs in Nigeria project. Four hundred million dollars of the total amount will be provided by the International Bank for Reconstruction and Development, while one hundred million dollars will come from the International Development Association. Both institutions operate under the World Bank Group.
The Development Bank of Nigeria will implement the programme, while credit guarantees will be issued through its subsidiary, Impact Credit Guarantee Limited. The structure is intended to reduce lending risks for financial institutions and encourage them to extend longer-term loans to small businesses.
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The facility targets key challenges faced by Nigerian MSMEs, including high interest rates, short loan tenors, and strict collateral requirements. Many small businesses, particularly women-owned enterprises and agribusinesses, have struggled to access formal financing under existing banking conditions.
Expected impact on the business sector
MSMEs account for a large share of employment in Nigeria and contribute significantly to national output. Despite this, access to bank credit remains limited, restricting business expansion and investment. The new loan facility is expected to improve liquidity for small firms and support business growth across multiple sectors.
By improving access to credit, the programme is expected to support job creation, productivity, and economic participation. It is also designed to promote financial inclusion by extending financing to underserved segments of the economy.
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Challenges and implementation
While the funding represents a major step, analysts note that access to finance alone will not resolve all challenges facing Nigerian MSMEs. Structural issues such as regulatory complexity, infrastructure gaps, and market instability remain concerns for business operators.
Successful implementation will depend on coordination between government institutions, financial intermediaries, and private sector stakeholders. If effectively deployed, the facility could strengthen small business resilience, reduce reliance on short-term borrowing, and contribute to broader economic stability.
