Private sector think tank urges overhaul of development finance system to boost manufacturing, agriculture, MSMEs and exports…..
The Centre for the Promotion of Private Enterprise (CPPE) has called for a major restructuring of Nigeria’s development finance framework, warning that businesses in manufacturing, agriculture, agribusiness, MSMEs and export-oriented sectors are facing a financing shortfall estimated at more than N50 trillion.
The organisation said the country’s productive sectors are being constrained by high interest rates, short repayment periods, strict collateral demands, limited lender appetite and inadequate access to long-term capital needed for expansion.
In a policy statement signed by its Chief Executive Officer, Dr. Muda Yusuf, CPPE argued that the challenge goes beyond a shortage of money, describing it as a structural weakness in Nigeria’s financial system caused by market failures, maturity mismatches, information gaps, sovereign borrowing pressures and limited incentives for banks to fund long-term productive investments.
Agriculture, manufacturing suffer biggest funding gaps
CPPE noted that agriculture contributes more than one-fifth of Nigeria’s Gross Domestic Product but has historically received less than five per cent of banking sector credit.
The group said manufacturing also requires substantial medium- and long-term financing to support factory expansion, technology upgrades, machinery acquisition, automation, energy infrastructure, backward integration and export development.
According to the organisation, such investments cannot be sustainably funded through short-term commercial bank loans with high interest rates because many productive projects require several years before generating sufficient returns.
It stressed that patient capital and affordable long-term financing remain critical to Nigeria’s industrial and agricultural transformation.
High interest rates worsen business challenges
CPPE said the current monetary environment has further intensified pressure on businesses, with the Monetary Policy Rate standing at 26.5 per cent and the Cash Reserve Requirement for deposit money banks at 45 per cent.
The organisation acknowledged the importance of monetary tightening in restoring policy credibility, supporting exchange rate stability and reducing inflationary pressures.
However, it warned that monetary stability must also support broader economic objectives, including investment, productivity, job creation and sustainable growth.
CPPE argued that price stability and development finance should not be treated as competing goals, noting that Nigeria requires targeted, transparent and well-managed interventions to address financing barriers affecting productive sectors.
The organisation stressed that the solution is not unrestricted monetary expansion but a carefully designed financing system that corrects market failures without undermining the credibility of monetary policy.
Why commercial banks alone cannot solve the problem
According to CPPE, relying solely on conventional commercial banking to fund Nigeria’s industrialisation is unrealistic because banks typically depend on short-term deposits while manufacturers and agricultural businesses often require financing spanning five to 10 years or more.
The group also identified excessive dependence on traditional collateral requirements as a major barrier, arguing that many viable businesses with strong cash flows, inventories, contracts and productive assets are excluded because they cannot provide conventional security demanded by lenders.
CPPE further highlighted sovereign crowding-out as another challenge, explaining that attractive returns from government securities often discourage financial institutions from taking on the risks associated with lending to businesses.
It added that manufacturing and agriculture create wider economic benefits—including employment, tax revenue, technology transfer, food security, export earnings and foreign exchange savings—that are not fully captured by individual lenders.
Development finance needs reform, not abandonment
While acknowledging previous challenges associated with government-backed intervention programmes, including weak repayment culture, governance concerns, political interference and poor beneficiary selection, CPPE said these problems should lead to reform rather than the withdrawal of development finance.
The organisation called for a modern system that is market-supporting rather than market-replacing, rules-based rather than discretionary, and focused on performance rather than allocation.
It recommended that the Central Bank of Nigeria (CBN) should serve mainly as a catalyst, refinancing institution and risk-sharing partner, while development finance institutions and commercial lenders handle credit assessment, lending and recovery.
CPPE’s proposed financing reforms
The organisation recommended that the government and the CBN should:
Strengthen and recapitalise development finance institutions, particularly the Bank of Industry and the Bank of Agriculture, to provide more long-term funding.
Expand credit guarantee and risk-sharing schemes for manufacturers, farmers, exporters and MSMEs.
Create specialised refinancing windows for agriculture and manufacturing value chains.
Promote supply-chain financing, receivables financing, warehouse receipt systems and cash-flow-based lending.
Improve credit information systems and technology-driven risk assessment.
Encourage pension funds, insurance companies and capital market investors to provide long-term financing for productive investments.
Reduce pressure from government borrowing that limits private sector access to credit.
Improve transparency, accountability and performance monitoring in development finance programmes.
Productive financing can help fight inflation
CPPE argued that properly designed development finance can complement the CBN’s inflation-control efforts because a significant part of Nigeria’s inflation problem is driven by supply-side challenges.
The group said increased financing for agriculture, manufacturing, energy efficiency, storage facilities and logistics could expand production capacity and reduce structural inflation over time.
It distinguished between financing consumption, which increases demand pressures, and financing productive activities, which expands supply and strengthens the economy.
Nigeria needs a new financing model
CPPE concluded that Nigeria’s financing deficit is too large and structural to be addressed by commercial banks alone.
The organisation said the country needs a transparent and commercially disciplined development finance system where the CBN enables rather than dominates, refinances rather than directly lends, shares risks rather than absorbs them, and attracts private capital instead of competing with it.
According to CPPE, closing the financing gap is essential for achieving industrial growth, agricultural transformation, food security, export diversification, employment creation and long-term economic competitiveness.
