Nigeria's Capital System Misallocates Growth Resources

A report has raised concerns about Nigeria's capital system, indicating it misallocates resources essential for growth and leaves millions of enterprises without access to formal credit. The report, presented by Hon.

Dele Oy, former president of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), highlights that despite a $500 million World Bank program aimed at mobilizing $1.89 billion for micro, small, and medium enterprises (MSMEs), the credit ecosystem remains fundamentally misaligned. MSMEs account for 96% of businesses, 48% of GDP, and 84% of private sector employment, yet fewer than 20% have access to formal bank credit.

The report criticizes the financial system for discouraging lending to the real economy, as banks prefer risk-free instruments. It also points out that the current monetary policy rate of 26.50% and headline inflation of 15.69% make lending unattractive.

The report calls for broad reforms to address the structural gaps in financing, which currently leave an estimated N130 trillion shortfall for MSME financing.