By Majeed Salaam
Nigeria’s struggle to turn economic stability into stronger production and job creation is exposing a persistent weakness: productive businesses still lack access to affordable, long-term capital.
The Centre for the Promotion of Private Enterprise (CPPE) has put the scale of the problem at more than N50 trillion, urging the federal government and the Central Bank of Nigeria (CBN) to rethink the country’s development finance framework.
The organisation argues that the problem is not simply a shortage of money in the financial system. Manufacturers, farmers, agribusinesses, exporters and micro, small and medium-sized enterprises (MSMEs) face high lending rates, short loan tenors, demanding collateral requirements, limited lender risk appetite and inadequate patient capital.
“CPPE estimates a conservative current real-sector financing gap of over N50 trillion when account is taken of unmet financing needs across manufacturing, agriculture, agribusiness, MSMEs, supply chains and export-oriented enterprises,” CPPE stated.
The gap is particularly significant in agriculture and manufacturing. Agriculture contributes more than one-fifth of GDP but has historically received less than five per cent of banking-sector credit, while manufacturers need medium- and long-term funding for machinery, technology, factory expansion, energy infrastructure and export development.
The difficulty is that commercial banks largely mobilise short-term deposits, while productive investments may require financing for five to 10 years or longer. CPPE therefore argues that expecting conventional banks alone to finance industrialisation and agricultural transformation is unrealistic.
Monetary policy has added another layer to the problem. CPPE said that the CBN’s 26.5 percent Monetary Policy Rate (MPR) and 45 percent Cash Reserve Requirement (CRR) have contributed to lending rates that many productive investments cannot support.
Yet the organisation acknowledged the benefits of monetary tightening, including improved policy credibility, exchange-rate stability and inflation management. Its argument is that stability should ultimately create room for productive growth rather than restrict it.
“Price stability and development finance should not be treated as mutually exclusive objectives. In an economy characterised by deep financing gaps, market failures and severe supply-side constraints, monetary stability must be complemented by carefully targeted, transparently governed and non-inflationary development finance interventions to support manufacturing, agriculture, agribusiness and other strategic productive sectors,” CPPE said.
The group is not calling for a return to indiscriminate intervention lending. Its preferred approach is a more disciplined system in which the CBN acts as a catalyst, refinancer and risk-sharing institution, while development finance institutions and commercial lenders handle appraisal, disbursement and recovery.
“The answer is not indiscriminate monetary expansion. It is a carefully designed development-finance framework targeted at identifiable market failures and structured to preserve monetary-policy credibility,” CPPE said.
CPPE acknowledged that previous intervention programmes suffered from weak loan recovery, political interference, beneficiary-selection problems and quasi-fiscal risks. But it argued that these failures should lead to institutional reform rather than withdrawal.
“These shortcomings provide a compelling case for reform, not retreat. Implementation failures should not be confused with the absence of genuine market failures in Nigeria’s financial system,” the organisation said.
Its recommendations include strengthening the Bank of Industry (BOI) and Bank of Agriculture (BOA), expanding credit guarantees and risk-sharing schemes, creating long-term refinancing windows, improving credit information and collateral systems, and mobilising pension, insurance and capital-market funds for productive investment.
CPPE also sees development finance as potentially complementary to inflation control, arguing that investment in productive capacity can address some of the supply constraints driving prices.
“The critical distinction is between financing consumption, which principally expands demand, and financing productive capacity, which expands supply,” it stated.
The debate, therefore, is no longer simply about whether Nigeria needs tighter monetary policy or more credit. It is about designing a financial system capable of maintaining stability while ensuring that businesses capable of expanding production can obtain the long-term capital needed to do so.
