The Centre for the Promotion of Private Enterprise (CPPE) has called for a comprehensive reform of Nigeria’s Development Finance Institutions (DFIs), arguing that the current mode of operations of the Bank of Industry, and the Bank of Agriculture, is inadequate to address the severe financing constraints facing the country’s real sector.
The Chief Executive Officer of CPPE, Dr. Muda Yusuf, made the call, stressing that reform has become imperative to support critical sectors of the economy, including manufacturing, agriculture, agribusiness, micro, small and medium-sized enterprises (MSMEs), and export-oriented businesses.
According to him, Nigeria’s real sector is confronted with a structural financing deficit characterized by prohibitively high interest rates, short loan tenors, stringent collateral requirements, limited risk appetite among lenders, and inadequate access to patient capital.
Financing Gap Exceeds ₦50 Trillion
Dr. Yusuf said the CPPE estimates that the country’s real sector currently faces a financing gap of more than ₦50 trillion, taking into account the unmet funding needs of manufacturing, agriculture, agribusiness, MSMEs, supply chains, and export-oriented enterprises.He noted that the financing mismatch is particularly pronounced in the agricultural sector.
” Agriculture contributes more than one-fifth of Nigeria’s Gross Domestic Product (GDP), yet historically receives less than five per cent of banking-sector credit.
Manufacturing also requires substantial medium- and long-term financing for machinery acquisition, factory expansion, technology upgrades, energy infrastructure, automation, backward integration and export development.
“Such investments cannot be sustainably financed through short-term commercial bank loans at prohibitively high interest rates.
Their long gestation periods and capital-intensive nature require patient, long-term financing at affordable rates, underscoring the critical role of development finance institutions and appropriately structured intervention funds,” he said.
Market Failure Requires Strategic Intervention
Against this backdrop, Dr. Yusuf argued that the core challenge is a clear case of market failure.
“It is unrealistic to expect conventional commercial banks alone to finance Nigeria’s industrialisation and agricultural transformation. Commercial banks primarily mobilise short-term deposits, whereas manufacturers and agribusinesses often require financing with repayment periods of five to ten years or more,” he said.
” Nigeria does not need a return to large, discretionary, and administratively allocated intervention funds. Instead, the country requires a modern development finance framework that is market-correcting rather than market-replacing; wholesale rather than retail; rules-based rather than discretionary; performance-driven rather than allocation-driven; and insulated from political interference.”
Development Finance Should Be Reformed, Not Abandoned
While acknowledging the shortcomings of previous Central Bank of Nigeria (CBN) development finance interventions—including governance concerns, weak loan repayment culture, political interference, poor beneficiary selection, quasi-fiscal risks, and monetary policy complications—Dr. Yusuf maintained that these weaknesses justify reform rather than abandonment.
He stressed that implementation failures should not be mistaken for the absence of genuine market failures within Nigeria’s financial system.
According to him, Nigeria does not need a return to large, discretionary, and administratively allocated intervention funds. Instead, the country requires a modern development finance framework that is market-correcting rather than market-replacing; wholesale rather than retail; rules-based rather than discretionary; performance-driven rather than allocation-driven; and insulated from political interference.
Dr. Yusuf further recommended that the Central Bank of Nigeria should function primarily as a catalyst, refinancer and risk-sharing institution, while Development Finance Institutions and participating financial institutions handle credit appraisal, lending and loan recovery.
He said the objective should be to leverage public-sector balance sheets to attract private capital, extend loan tenors, reduce identifiable financing risks, and channel significantly more credit to productive sectors without undermining the credibility of monetary policy.
