Nigeria’s business environment presents troubling contradictions. Billions of dollars are being mobilised every year for energy, infrastructure, oil and gas, finance and real estate, yet the small and medium-sized enterprises that provide livelihoods for millions of Nigerians remain largely excluded from the formal capital market. This is not simply a financing problem but a structural weakness that threatens the quality, inclusiveness and sustainability of Nigeria’s economic growth.
Deal rooms may be full, but if the capital circulating through them does not reach the businesses that create jobs, distribute income and drive local production, the wider economy will continue to struggle. Growth concentrated among large corporations and major projects cannot, by itself, deliver broad-based prosperity. The problem is understandable from the perspective of conventional lenders. Banks and investors want predictable revenue, verifiable collateral, established off-takers and contracts that fit familiar project-finance models.
But what is rational from a lender’s narrow risk-management perspective can become economically damaging when applied indiscriminately to the entire economy. A cold-storage operator, rural clinic, small manufacturer or farmer does not necessarily possess the kind of hard assets that commercial banks demand. Yet, such businesses may have customers, recurring cash flows, productive assets and significant potential for expansion.
The financial system must therefore learn to distinguish between lack of collateral and lack of viability. At present, too many potentially viable businesses are being denied capital because they cannot satisfy financing structures designed primarily for larger enterprises. The result is predictable – businesses remain small, entrepreneurs postpone investment, equipment is not purchased, workers are not hired and productive capacity remains below its potential. High interest rates make the problem even worse.
With the Central Bank of Nigeria’s benchmark rate at 26.5 percent, conventional borrowing can become prohibitively expensive for businesses whose margins are already being squeezed by energy costs,