The National Credit Guarantee Company (NCGC) has been established to unlock access to credit for Nigeria’s underserved Micro, Small, and Medium Enterprises (MSMEs) and drive inclusive economic growth. With an initial capital of N100 billion, the NCGC aims to provide up to 60% credit guarantees on loans extended to MSMEs through commercial banks, microfinance institutions, and fintech companies.
Subsequently, through Vice President Kashim Shettima, the government officially inaugurated the Board of Directors of the NCGC on 3 to 4 July 2025 at the Presidential Villa in Abuja.
The initiative came amid a soaring SME collapse and widespread business failures across Nigeria. But will it effectively bridge the financing gap and catalyse recovery for the millions of entrepreneurs struggling to survive in a challenging economic environment. Vice President Shettima had described NCGC’s role as a bridge for businesses spanning agriculture to technology.
The credit guarantee company was established with a clear and ambitious mandate to unlock much-needed financing for Nigeria’s MSMEs by mitigating the risks faced by lenders. Specifically, it is designed to provide up to 60% credit guarantees on loans extended to MSMEs through commercial banks, microfinance institutions, and fintech companies.
This risk-sharing mechanism aims to encourage financial institutions to lend more boldly to sectors that are underserved due to perceived high risk and lack of collateral
Most interesting is that the company’s target beneficiaries include youth-led enterprises, empowering Nigeria’s vibrant young entrepreneurs; women-owned businesses, promoting gender inclusion and economic empowerment; micro and small enterprises, which constitute the backbone of Nigeria’s economy; exporters and manufacturers, who are key drivers of economic diversification; and solar-tech operators and other innovative sectors, supporting green energy and technology adoption. Through these focused interventions, the NCGC aspires to be a catalyst for inclusive growth, job creation, and sustainable development across Nigeria’s diverse economic landscape.
Nigeria’s SME Collapse
Over 50% of MSMEs (SMEs) fail within their first year of operation, and more than 95% do not survive beyond five years. This high failure rate reflects the immense challenges faced by small businesses in Nigeria’s difficult economic environment.
Approximately 1.9 million businesses have been lost since 2017. The Nigerian Economic Summit Group (NESG) recently revealed that between 2023 and 2024 alone, 30% of the country’s 24 million registered MSMEs, around 7.2 million businesses, shut down, resulting in an estimated N94 trillion economic loss.
The main causes include poor market demand, lack of access to finance, infrastructure deficits, harsh economic policies, and insecurity.
There is ample evidence that Nigeria has a long history of government-backed credit guarantee and SME intervention schemes that largely failed to achieve their objectives. The Central Bank of Nigeria’s Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), launched in 2010 with N200 billion and an 80% guarantee, was largely ignored by banks due to perceived high risks, cumbersome processes, and inadequate SME preparedness.
Also, the Small and Medium Enterprises Equity Investment Scheme (SMEEIS) of 2001 mandated banks to invest 10% of their profits in SMEs, but only about half of the required investments were realised, with negligible impact due to banks’ risk aversion and SMEs’ reluctance to accept equity participation.
Various CBN intervention funds totalling trillions of naira have been disbursed over the years, but only about 20% of these funds reached intended SMEs because of bureaucratic bottlenecks, stringent collateral requirements, and mismanagement.
Corruption and political interference further undermined these programmes, with funds often diverted to political associates rather than genuine SMEs. Studies also show that post-bank consolidation, credit delivery to SMEs decreased significantly, hindered by high lending costs, poor infrastructure, and a lack of formal financial records among SMEs.
These systemic issues risk aversion by banks, bureaucratic inefficiencies, poor programme design, and corruption, have repeatedly stifled SME access to finance in Nigeria, underscoring the critical challenges the new NCGC is bound to face.
Additional Time-Based Challenges
Aside from the historical challenges that caused previous SME support programmes to fail, Nigerian SMEs faced numerous pressing obstacles between 2023 and 2024, which the current administration was aware of but arguably did not fully address before launching the NCGC. Key factors driving SME collapse are not limited to inaccessible finance. There is also poor infrastructure, particularly an unreliable power supply and bad roads. Security concerns such as kidnapping, banditry, and civil unrest have significantly raised operating costs and risks, especially in vulnerable regions.
High inflation, inefficient management, and complex regulatory frameworks have also worsened the situation. Inflation peaked at over 28% in late 2023, while the naira depreciated drastically, worsening input costs and squeezing profit margins. The removal of fuel subsidies and currency volatility further increased production and transportation expenses, suppressing consumer demand. Multiple taxation, high energy costs, and bureaucratic bottlenecks continue to stifle SME growth.
Approximately 83.9% of SMEs report that rising inflation has severely impacted their businesses, potentially overwhelming the benefits of credit guarantees. Policy instability and multiple taxation create an unpredictable business environment that further undermines SME viability.
These systemic and macroeconomic pressures contributed to the closure of the reported a30% of Nigeria’s MSMEs between 2023 and 2024, resulting in an estimated N94 trillion economic loss. Given this complex environment, the success of the NCGC will depend on how effectively it navigates these multifaceted challenges alongside traditional financing barriers.
For the NCGC to succeed, it must overcome past challenges by offering substantial guarantee coverage to incentivise banks to lend to MSMEs. Awareness and ease of application for both SMEs and lenders are crucial, as previous schemes failed due to poor communication and complex processes.
Although the NCGC’s partnerships with commercial banks, microfinance banks, fintechs, and rural cooperatives aim to reach more businesses, their effectiveness depends on clear coordination. Transparency and strong governance with public reporting mechanisms are also essential to build trust and prevent mismanagement.
So, Where Is NCGC Going?
The NCGC’s success depends on becoming a streamlined, well-governed, and inclusive lifeline rather than another bureaucratic failure. Beyond financing, it must address real SME challenges like location, insecurity, and inflation. Early indicators, guarantees issued, default rates, and business survival beyond year one will reveal if it can truly revive Nigeria’s SME sector.
Recommendations: Clearing the Path for Real Impact
The NCGC is a new institution, much like a farmer clearing bush before cultivation; it needs a clear and supportive environment to flourish. While it is too early to judge its impact, the focus must be on securing early wins through strong design and readiness of the broader ecosystem. If the government genuinely intends to empower Nigerian entrepreneurs, it must go beyond policy declarations to actively remove barriers hindering growth and demonstrate real commitment. The government should also know that as it empowers its citizens, so it does empower itself.
Therefore, to ensure the NCGC achieves meaningful results, the government must not wait for reform; it must build it. A robust public awareness campaign is essential, leveraging nationwide outreach in local languages through banks, cooperatives, and fintech platforms.
The application process should be digitally simplified with one-page forms, mobile-friendly portals, and minimal collateral requirements to ease access. Strong partnerships with microfinance institutions, fintech companies, and local government business hubs will broaden reach and support. Complementary services such as business advisory, financial management training, and market linkages are vital to empower SMEs beyond just credit provision.
Equally critical is addressing systemic obstacles like insecurity, unreliable power supply, poor roads, and inflation through coordinated government action. Transparent governance with independent oversight, quarterly performance reports, default tracking, and audits will build trust and accountability.
– Dr Mbamalu, is the publisher of Prime Business Africa
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