Nigerian Banks Struggle to Lend to SMEs Amid Challenges

Nigerian banks continue to face challenges in lending to small and medium-sized enterprises (SMEs) due to a lack of reliable financial data, uneven cash flow, and poor collateral documentation. The World Bank approved a $500 million program in December 2025 to expand financing for small businesses in Nigeria, expecting to mobilize $1.89 billion in private capital and support 250,000 micro, small, and medium enterprises (MSMEs) through guarantees.

Despite these efforts, banks remain cautious, citing the difficulty in assessing the financial health of SMEs and the associated risks. The Central Bank of Nigeria (CBN) reported that less than 5% of bank credit goes to the agricultural sector, highlighting the broader issue of credit allocation.

The CBN's recent monetary policy decisions, including a reduction in the monetary policy rate to 26.5%, aim to address these challenges, but the banking sector's reluctance to lend persists due to the perceived risks associated with SMEs.