CPPE Pushes Development Finance Overhaul to Close Nigeria’s N50trn Real Sector Funding Gap

The Centre for the Promotion of Private Enterprise (CPPE) has called for a fundamental overhaul of Nigeria’s development finance architecture, warning that the country’s productive sectors face a financing gap exceeding N50 trillion that continues to constrain industrial growth, agricultural productivity and export competitiveness.

In a policy brief released on Sunday, the private sector think tank said the financing deficit reflects structural weaknesses within Nigeria’s financial system rather than temporary liquidity shortages.

“Nigeria’s real sector is confronted with a structural financing deficit characterised by prohibitive interest rates, short loan tenors, stringent collateral requirements, limited risk appetite and inadequate patient capital,” the CPPE said.

The organisation estimated that unmet financing needs across manufacturing, agriculture, agribusiness, micro, small and medium-sized enterprises (MSMEs), supply chains and export-oriented businesses now exceed N50 trillion.

According to the CPPE, agriculture contributes more than one-fifth of Nigeria’s Gross Domestic Product but historically receives less than five per cent of banking sector credit, while manufacturers require long-term financing for machinery, factory expansion, technology upgrades, energy infrastructure and export development.

“With the Monetary Policy Rate at 26.5 per cent and the Cash Reserve Requirement for deposit money banks at 45 per cent, commercial lending rates have become increasingly incompatible with the returns expected from productive investments,” it reads.

While acknowledging that tighter monetary policy has strengthened policy credibility, supported exchange-rate stability and moderated inflationary pressures, the organisation argued that price stability should not come at the expense of investment and economic expansion.

“Price stability and development finance should not be treated as mutually exclusive objectives,” the CPPE stated, adding that monetary stability should be complemented by “carefully targeted, transparently governed and non-inflationary development finance interventions” for productive sectors.

The CPPE argued that expecting commercial banks alone to finance Nigeria’s industrialisation is unrealistic because they mobilise mainly short-term deposits while manufacturers and agribusinesses require financing spanning five to 10 years or longer.

It also identified information asymmetry, excessive collateral requirements and sovereign crowding-out as major distortions limiting credit to productive enterprises.

According to the organisation, these market failures justify targeted development finance interventions because manufacturing and agriculture generate broader economic benefits, including employment creation, technology transfer, food security and export earnings, that extend beyond private financial returns.

Although previous intervention programmes were weakened by governance concerns, political interference and weak loan recovery, the CPPE argued that those shortcomings should lead to reforms rather than an abandonment of development finance.

“Implementation failures should not be confused with the absence of genuine market failures in Nigeria’s financial system,” the policy brief said.

The organisation recommended recapitalising the Bank of Industry and the Bank of Agriculture, expanding risk-sharing mechanisms, creating specialised refinancing windows for manufacturing and agriculture, mobilising pension and insurance funds for long-term investments, and strengthening governance and accountability across development finance programmes.

The CPPE concluded that Nigeria requires “a transparent, rules-based and commercially disciplined development-finance architecture” capable of crowding in private capital, accelerating industrialisation, improving agricultural productivity and supporting long-term economic competitiveness.