CBN Moves to Reposition DFIs to Bridge N130trn MSME Financing Gap

The Central Bank of Nigeria has unveiled plans to recapitalise and restructure Development Finance Institutions (DFIs) in a bid to address a widening funding gap estimated at over N130 trillion for micro, small and medium enterprises (MSMEs).

This was disclosed by the bank’s Deputy Governor for Economic Policy, Muhammad Sani Abdullahi, during a policy discussion at the launch of the Nigeria Development Update in Abuja.

Abdullahi explained that a recent assessment of Nigeria’s development finance ecosystem revealed a significant mismatch between available funding and actual demand from businesses.

“We did a review last year around the whole development finance space. And out of all the DFIs in Nigeria, what we have is a total asset base of over N8 trillion, whereas what is really required in terms of development finance for MSMEs is over N130 trillion,” he said.

He emphasised that bridging this gap would require more than public sector funding, noting the need to reposition DFIs as investable and commercially viable institutions.

“The only way to do it is not only through public sector injecting capital in these agencies, but it’s also to make them bankable, to make them investable,” he added.

Read Also:

• Nigeria’s Banking Sector Recapitalisation: Opportunities for Growth
• Polaris Bank Champions MSME Export Growth with NAHCO and NACCIMA

According to him, the apex bank is collaborating with the Ministry of Finance to overhaul the structure and operational framework of DFIs.

“We’re looking at that entire sector to ensure that we can correct the incentives, improve the risk appetite, and also ensure that capital is improved,” he said.
“We’re looking at it structurally to see how more market fundamentals can go into these things because the way it’s been done in the past has not worked.”

Abdullahi linked the reform agenda to ongoing banking sector recapitalisation, noting that increased capital levels would drive higher credit creation.

“Now, with the N4.6 trillion raised by the banking sector, there’s a lot more funds that have to return ROI for their investors. And so we envisage going forward that there’ll be a lot more credit that’s available,” he stated.

However, he stressed that the CBN would avoid policies that compel banks to lend to specific sectors.

“What we do want to shy away from very strongly is this administratively directed credit… you cannot direct banks to lend to particular businesses. Banks have to do their own risk assessments,” he said.

He acknowledged that access to finance remains a longstanding structural constraint within Nigeria’s economy.

“I think lending to the real sector has always been one of the structural challenges that Nigeria’s economy faces,” he noted.

Abdullahi expressed optimism that a combination of stronger commercial banks and reformed DFIs would improve credit flow to businesses.

“With the mix of the commercial banks with larger capital, with DFIs undergoing some level of structural reforms… we see a lot more credit being able to flow.”

He also pointed to resilience in economic activity, noting that key indicators such as the Purchasing Managers’ Index remain above the 50-point threshold, signalling expansion despite high borrowing costs.