The Centre for the Promotion of Private Enterprise (CPPE) has called for a comprehensive overhaul of Nigeria’s development finance framework, warning that the country’s productive sectors are grappling with a financing shortfall exceeding N50 trillion, a situation it says threatens industrialisation, food security, export diversification and job creation.
In a policy brief released on Sunday, Muda Yusuf, Chief Executive Officer of CPPE, argued that manufacturers, farmers, agribusinesses, micro, small and medium enterprises (MSMEs), and export-oriented firms are constrained by prohibitive lending rates, short loan tenors, stringent collateral requirements and inadequate long-term financing.
According to the private sector advocacy group, these challenges are symptoms of deeper structural failures within Nigeria’s financial system rather than temporary liquidity shortages.
CPPE estimated that the country’s real sector currently faces a conservative financing gap of more than N50 trillion, taking into account the unmet funding needs of manufacturing, agriculture, agribusiness, MSMEs, supply chains and export-oriented businesses.
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The organisation noted that while agriculture contributes more than one-fifth of Nigeria’s Gross Domestic Product (GDP), it has historically received less than five percent of total banking sector credit. Manufacturing, it added, requires substantial medium- and long-term financing for machinery acquisition, factory expansion, technology upgrades, energy infrastructure, automation, backward integration and export development.
“Nigeria’s real sector is confronted with a structural financing deficit characterised by prohibitive interest rates, short loan tenors, stringent collateral requirements, limited risk appetite and inadequate patient capital.
“These are not merely liquidity problems; they reflect deep-seated market failures in the financial system, including maturity mismatches, information asymmetry, sovereign crowding-out and the inability of private lenders to capture the wider economic benefits of real sector investments
“Such investments cannot be sustainably financed through short-tenor commercial bank credit at prohibitively high interest rates. Their long gestation periods and capital-intensive nature require patient, long-term financing at affordable rates, underscoring the critical role of development finance institutions and appropriately structured intervention funds,” the policy brief stated, stressing that long-term productive investments require patient capital at affordable rates.
The CPPE also linked the financing challenges to the country’s current monetary policy environment, noting that the Monetary Policy Rate (MPR) of 26.5 percent and the Cash Reserve Requirement (CRR) of 45 percent have pushed commercial lending rates beyond levels compatible with productive investments.
While acknowledging the Central Bank of Nigeria’s efforts to restore monetary policy credibility, stabilise the exchange rate and moderate inflation, CPPE argued that price stability should not come at the expense of investment and economic expansion.
“The challenge is to achieve an appropriate balance between price stability and the financing needs of the productive sectors of the economy,” Yusuf said.