BOI’s N636bn Not Enough As Banks Shun SMEs In Uncertain Economy, ASBON Warns

Nigeria’s small and medium-sized enterprises (SMEs) are grappling with tightening credit access despite record lending from development banks like the Bank of Industry (BOI), raising doubts over the reach of current financing efforts.

The BOI disclosed it disbursed N636 billion to over 7,000 businesses in 2025—its largest annual outlay ever.

The funds were deployed across manufacturing, agribusiness, infrastructure, ICT, services and the creative economy, supported by international funding and federal government intervention programmes.

However, SME stakeholders and the national president of the Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, said the record disbursement had not translated into broad access for the country’s vast SME base.

Speaking on lending conditions, Egbesola said most small businesses remain effectively locked out of affordable financing due to high interest rates, stricter lending conditions and declining risk appetite among commercial banks.

He said access to credit has become more restrictive in practical terms,” the association said, stressing that “Even where funds are announced, the cost of borrowing and compliance requirements place them beyond the reach of many small enterprises. Interest rates have risen to levels that make repayment extremely difficult under current economic realities.”

ASBON stated that banks were prioritising capital preservation amid macroeconomic uncertainty and recapitalisation pressures, leading to a shift away from SME lending.

“Commercial banks now consider small businesses high-risk exposures,” the association said. “As a result, credit approval thresholds have tightened significantly. Many lenders are channelling liquidity into government securities where returns are more predictable, and risk is lower.”

The group also raised concerns about the scale and consistency of intervention funding.

“The last major intervention targeted at SMEs was in 2023, and while welcome, it remains insufficient relative to the size of the sector,” ASBON said. “With over 40 million SMEs in Nigeria, available support does not close the financing gap. What we are seeing is a structural shortfall rather than a temporary funding challenge.”

According to the association, limited access to capital is already affecting business survival and expansion.

“Many small enterprises are operating below capacity because they cannot secure working capital. Others are scaling down or shutting operations entirely. The broader implication is slower job creation and reduced economic activity across multiple sectors.”

ASBON further noted a decline in non-bank funding sources, including grants and corporate support programmes.

“Private-sector grant initiatives and corporate social responsibility funding have contracted as companies adjust to economic pressures. This has removed an important alternative funding channel for startups and micro enterprises,” it said.

Although BOI reported that N178 billion of its 2025 financing went to SMEs, a larger portion, N375 billion, was allocated to large enterprises, reflecting lender preference for borrowers with stronger financial capacity.

BOI said its interventions supported job creation, infrastructure development and enterprise expansion nationwide, including targeted programmes for youth-led businesses, women entrepreneurs and rural enterprises.

Industry stakeholders, however, say financing constraints remain widespread despite these interventions. Business operators also cited limited capacity among institutions such as the Development Bank of Nigeria and the Bank of Agriculture to offset declining private-sector credit.

ASBON warned that without broader, more accessible financing channels, the SME sector’s contribution to employment and economic growth could further weaken.

“The challenge is no longer just about announcing funding volumes,” the association said. “What matters is accessibility, affordability and consistency of credit to the segment that drives the majority of economic participation.”

The financing imbalance is emerging as a key policy concern for the administration of Bola Ahmed Tinubu, which has prioritised industrial expansion and enterprise development as part of its economic reform agenda.

Speaking further in a chat with LEADERSHIP, ASBON Boss described the lending statistics as very low, noting that commercial banks now consider SMEs risky ventures from which operators can’t access funds.

Egbesola said that a high percentage of SMEs were nano operators, particularly in Nigeria’s economy, where over 40 million businesses are classified as nano.

‎These Nano businesses often operate as kiosks, corner shops, or small workshops, sometimes with zero employees and no yearly turnover.

‎Although there are numerous, these enterprises face significant challenges in growth, funding, and infrastructure.

‎He decried that the funding gaps were still very low, as over 40 million SMEs don’t have access to loans from the commercial banks.

He cited that banks now see SMEs as risky ventures, even in the face of the CBN’s recapitalisation efforts.

‎He alluded to the fact that the majority of SMEs are experiencing loan glitches, a hike in loan interest rates, and an MPR ratio that is being passed off as high-interest loans to SMEs and local manufacturers.

‎He added that the N75 billion in intervention funds deployed by the federal government could not target MSMEs, citing that MSMEs are operating at risk.

Reacting to the liquidity challenges faced by SMEs, the CEO and director of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, advocates targeted, concessionary financing to address structural gaps, urging the CBN to ease credit squeezes and improve policy transmission.

He emphasised that high interest rates and inadequate infrastructure hinder small business growth, calling for improved regulatory environments and specialised development finance instruments to boost competitiveness.

Yusuf argues that market-based approaches alone do not solve structural financing gaps for SMEs. He calls for the Central Bank of Nigeria (CBN) to develop specific credit guarantee schemes and concessionary financing for SMEs and critical sectors.

He urged the CBN to moderate interest rates to ease the high cost of borrowing, which has burdened small businesses.

Yusuf, while addressing structural rigidities, emphasises that without fixing infrastructure and other structural constraints, the benefits of monetary easing will not reach the real sector.

Speaking further on recapitalisation and banking sector alignment, Yusuf suggests that bank recapitalisation efforts must ensure that SMEs’ funding needs are met, and warns against policies that could lead to the financial exclusion of smaller firms.

He advocates for a more “friendly” regulatory, tax, and retail environment to support SME growth.