CBN seeks DFIs recapitalisation to close N230tr financing gap
By Nduka Chiejina, Abuja The Central Bank of Nigeria (CBN) has called for urgent recapitalisation and restructuring of Nigeria’s development finance institutions, warning that the current size and structure of
By Nduka Chiejina, Abuja
The Central Bank of Nigeria (CBN) has called for urgent recapitalisation and restructuring of Nigeria’s development finance institutions, warning that the current size and structure of the sector are too weak to meet the country’s financing needs.
Speaking at the presentation of the World Bank Nigeria Development Update in Abuja, Deputy Governor for Economic Policy at the CBN Mohammed Sani Abdullahi said institutions such as the Bank of Industry (BoI), Development Bank of Nigeria (DBN), Nigerian Export-Import Bank (NEXIM), Bank of Agriculture (BoA), Federal Mortgage Bank of Nigeria (FMBN) and The Infrastructure Bank (TIB) remain far too small compared to the scale of funding required by businesses across the country.
He said a review of the development finance space revealed a major gap between available capital and actual demand, particularly for micro, small and medium enterprises.
“Out of all the DFIs in Nigeria, what we have is a total asset base of about N8 trillion, whereas what is really required in terms of development finance for MSMEs is over N230 trillion. So you can see that the gap is quite wide,” Abdullahi said.
He warned against returning to policies that force banks to lend to specific sectors, noting that such approaches have failed in the past.
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“What we want to shy away from very strongly is administratively directed credit. It has never worked. You cannot direct banks to lend to particular businesses. Banks have to do their own risk assessments and take decisions based on their risk appetite,” he said.
Instead, he said the focus should be on strengthening development finance institutions so they can perform their intended role effectively. According to him, recapitalisation alone will not be enough, as broader structural reforms are also required.
He said: “The only way to do it is not only through public sector injecting capital in these agencies, but also to make them bankable and investable. We need to build a system that can deploy much larger capital.”
Abdullahi noted that some DFIs are already struggling with high levels of non-performing loans, which has weakened their ability to support businesses.
He said authorities are reviewing the sector to improve governance, correct incentives and strengthen risk management.
“We are looking at the entire sector to ensure that we can correct the incentives, improve the risk appetite, and also ensure that capital is improved,” he said, adding that both the central bank and the Ministry of Finance hold significant stakes in many of the institutions.
Looking ahead, he said the strategy would focus on making DFIs more market-driven and attractive to investors, with the aim of drawing in private capital to complement government funding.
On the broader economy, Abdullahi said business activity remains resilient despite high interest rates. He pointed to the Purchasing Managers’ Index, which has remained above 50, indicating continued expansion.
“This shows that businesses are still making expansion decisions despite the cost of credit,” he said, expressing confidence that improved access to financing would further accelerate economic growth.
Also speaking at the event, the World Bank’s Lead Economist for Nigeria Fiseha Haile, said the country’s external position has improved in recent months, supported by key reforms and stronger macroeconomic management.
According to the report, Nigeria has recorded gains in external reserves, built stronger buffers and reduced volatility in the foreign exchange market following the unification of the exchange rate system.
These developments, the economist said, have improved the country’s ability to withstand external shocks, although risks remain.
Among the major risks identified are potential declines in foreign portfolio investment and foreign direct investment, as well as reduced remittance inflows and rising costs of borrowing from international markets.
The World Bank also advised that monetary policy should remain tight until inflation is brought down to more sustainable levels, while maintaining flexibility in the foreign exchange market and continuing with ongoing reforms.
In addition, the report called for structural changes to improve market efficiency, particularly in the energy sector. It recommended restoring competition in the fuel market, including reopening imports, as a way to reduce prices.
The economist also pointed to the need to address supply-side constraints by reducing tariffs and removing import restrictions on both finished goods and raw materials. These measures, he said, would help lower production costs and ease inflationary pressures across the economy.
