SMEs get just 0.5% of banks’ credit in 10 years

…As banks lend N1trn to SMEs out of N199trn

By Yinka Kolawole

Small and medium-scale enterprises (SMEs) have received only 0.51 percent of total banks’ credit to the private sector over a 10-year period, available data has shown, underscoring severe financing constraints facing Nigeria’s biggest source of jobs.

Analysis of the Central Bank of Nigeria (CBN) Statistical Bulletin (2014–2023) shows that out of N199.63 trillion total loans to the private sector, SMEs accessed just N1.01 trillion, highlighting their marginalisation within the formal banking system.

Credit flow to SMEs over the years has been consistently weak despite fluctuations. In 2014, banks disbursed N116.07 billion to SMEs out of N1.32 trillion, representing 0.88 per cent. This fell sharply in 2015 to N2.95 billion, or 0.02 per cent.

Between 2016 and 2017, SME lending stood at N10.75 billion annually, accounting for 0.07 per cent of total credit. In 2018, SMEs received N44.82 billion (0.29 per cent), rising to N123.93 billion (0.71 per cent) in 2019 before weakening again.

In 2020, SME credit fell to N62.51 billion (0.32 per cent), followed by N83.74 billion (0.38 per cent) in 2021 and N93.45 billion (0.36 per cent) in 2022. Lending improved in 2023 to N465.37 billion out of N3.93 trillion, or 1.18 per cent, the highest share in the decade but still marginal.

The weak credit flow contrasts with Nigeria’s estimated N48 trillion MSME financing gap, according to PwC (2024).

Although intervention agencies such as the Bank of Industry (BoI), the Small and Medium Enterprises Development Agency of Nigeria, SMEDAN, and other development finance institutions, DFIs, have expanded support, analysts say their impact remains limited. Commercial lending rates above 30 per cent and short loan tenors continue to restrict SME expansion.

Access to long-term and affordable finance remains one of the most binding constraints to SME development. Commercial lending rates frequently exceed 30 per cent, while loan tenors are typically below three years, limiting SMEs’ ability to invest, expand capacity or adopt new technologies.

While institutions such as the BoI and the Development Bank of Nigeria, DBN, have improved access modestly, the scale remains limited. According to the BoI 2024 Annual Report, only 15.3 per cent (N78.2 billion) of the N510.9 billion disbursed in the year went to micro, small and medium enterprises, MSMEs, while SMEDAN data show about 79 per cent of MSMEs rely on personal savings for financing.

Analysts say Nigeria’s industrial strategy has favoured large firms, limiting broad-based industrialisation. 

Commenting on the way forward, Amaka Nwaokolo, Director and Head of The FATE Institute, the research, policy and advocacy arm of Fate Foundation, said Nigeria must shift to an industrial strategy that places small firms at its core.

According to her, Nigeria’s 41 million NMSMEs hold the key to industrial renewal, serving as producers of goods at scale, suppliers of inputs to larger firms and service providers that sustain broader industrial ecosystems.

“Nigeria must therefore move from merely supporting small firms to placing them at the core of the country’s industrial strategy,” she stated.

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