80% of Nigerian MSMEs still locked out of formal credit–NCGC

Nigeria’s micro, small, and medium enterprises (MSMEs) are still largely shut out from formal lending channels, with an estimated 80% lacking access to credit due to stringent collateral requirements and lenders’ aversion to risk.

This alarming statistic was revealed at the inaugural Stakeholders’ Engagement Forum hosted by the National Credit Guarantee Company (NCGC) in Lagos on Monday, July 28, 2025.

Themed “Unlocking Access to Finance Through Credit Guarantees and Strategic Partnerships,” the forum brought together key players from commercial banks, microfinance institutions, fintech companies, and Development Finance Institutions (DFIs) to explore new frameworks for inclusive financing.

Delivering his keynote address, Mr. Bonaventure Okhaimo, Managing Director of NCGC, described the credit exclusion crisis as a major barrier to Nigeria’s economic recovery and growth.

“An estimated 80% of MSMEs still lack access to formal credit due to collateral constraints and lenders’ risk aversion. This is a gap we must close,” Okhaimo said.

He stressed that the creation of NCGC is a bold step by the administration of President Bola Ahmed Tinubu to de-risk lending, enhance financial inclusion, and unlock the productive potential of Nigeria’s underserved entrepreneurial class.

NCGC, launched with an initial capital base of N100 billion, is a strategic initiative of the Ministry of Finance Incorporated (MOFI) in partnership with the Bank of Industry (BoI), Credicorp Ltd., and the Nigeria Sovereign Investment Authority (NSIA). It also benefits from technical support from the Central Bank of Nigeria (CBN) and the World Bank.

Rather than lending directly, NCGC will operate as a partial guarantor, covering a portion of potential defaults to reduce the credit risk faced by participating financial institutions (PFIs).

The model is designed to stimulate private sector lending by encouraging financial institutions to finance viable but credit-constrained MSMEs.

“We are here to play the role of a guarantor — not a lender,” Okhaimo explained. “By covering a portion of potential loan defaults, we reduce lender risk and incentivize broader credit access.”

Despite signs of macroeconomic growth — including a 3.13% GDP increase in Q1 2025 — the business environment remains fraught with challenges. Okhaimo warned that over 40% of manufacturers currently lack the funding to operate at full capacity, a situation that contributed to the closure of 767 manufacturing firms and the loss of over 18,000 jobs in 2023.

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The situation is further reflected in trade data: manufacturing export value plummeted from N1.04 trillion in Q3 2024 to just N294 billion in Q1 2025, largely due to credit scarcity and prohibitive interest rates.

Renowned economist Dr. Biodun Adedipe, Founder of B. Adedipe Associates Ltd., provided a sobering historical analysis of Nigeria’s credit ecosystem, which he described as “chronically underperforming.”

“Between 2015 and 2020, Nigeria’s private sector credit-to-GDP ratio hovered between 10% and 15%,” Adedipe noted. “This pales in comparison to South Africa’s 109.05%, Morocco’s 66.01%, and even Kenya’s 32.15%. The global average stands at 146.4%.”

He described NCGC as a long-overdue institutional fix, capable of correcting long-standing imbalances in Nigeria’s financial architecture.

Similarly, Prof. Chris Onalo, Registrar/CEO of the National Institute of Credit Administration (NICA), emphasized the need for transparency and public confidence in NCGC’s operations.

“Credibility and transparency will build the trust needed for NCGC to succeed,” Onalo said. “The company must align with broader financial inclusion efforts to have lasting impact.”

“Together, we can ensure that viable borrowers — from smallholder farmers to factory owners — are met with opportunity, not exclusion,” Okhaimo concluded.