The Central Bank of Nigeria (CBN) is set to recapitalise and restructure development finance institutions (DFIs) as part of a broader push to close a massive financing gap confronting micro, small and medium enterprises (MSMEs).
CBN Deputy Governor for Economic Policy, Muhammad Sani Abdullahi, disclosed this at a panel session during the launch of the Nigeria Development Update (NDU) by the World Bank in Abuja on Tuesday.
He said a recent assessment by the apex bank showed a stark mismatch between the capacity of DFIs and the credit needs of businesses.
“Across all DFIs in Nigeria, the combined asset base is just over N8 trillion, while the financing requirement for MSMEs exceeds N130 trillion,” Abdullahi said.
He stressed that the scale of the shortfall demands deeper structural reforms, not just capital injections.
“It’s not only about public sector funding. These institutions must be repositioned to become bankable and attractive to investors,” he noted.
Abdullahi explained that the CBN is collaborating with the Ministry of Finance to revamp the DFI landscape, focusing on improving incentives, strengthening risk appetite, and boosting capital.
“We are reviewing the entire framework to correct distortions and ensure the institutions are better structured to deliver,” he said.
He added that the reforms would embed stronger market-based principles, noting that past approaches have not delivered optimal outcomes.
“We are taking a more structural, market-oriented approach because the previous model has clearly underperformed,” he stated.
The Deputy Governor linked the initiative to the recent banking sector recapitalisation, which he said would enhance liquidity and lending capacity.
“With about N4.6 trillion raised by banks, there is now increased pressure to generate returns, which should translate into more credit in the system,” he said.
However, he emphasised that the CBN would avoid directing banks to lend to specific sectors.
“We are deliberately moving away from administratively directed lending. Banks must retain the independence to assess risks and make credit decisions,” Abdullahi said.
He reiterated that limited access to finance remains a persistent structural constraint, particularly for MSMEs.
“Ensuring that credit flows to the real sector has always been a major challenge for the Nigerian economy,” he added.
Abdullahi expressed optimism that a combination of stronger commercial banks and reformed DFIs would improve credit delivery.
“With better-capitalised banks and restructured DFIs, we expect to see increased financing to businesses,” he said.
Despite high borrowing costs, he noted that business activity has remained resilient, with the Purchasing Managers’ Index (PMI) staying above the 50-point threshold, indicating continued expansion.
He expressed confidence that ongoing reforms would gradually ease financing constraints and support economic growth.
Meanwhile, the CBN confirmed that 33 banks have met the revised minimum capital requirements under its recently concluded recapitalisation programme.
According to the apex bank, a total of N4.65 trillion was raised over the 24-month exercise, pushing capital adequacy ratios above Basel benchmarks and strengthening the sector’s ability to absorb shocks.
The exercise also saw strong domestic participation, with 72.55 per cent of the funds sourced locally—an indication of rising investor confidence in Nigeria’s banking sector.
