CBN moves to recapitalise DFIs to unlock MSME funding

THE Central Bank of Nigeria (CBN) is considering a fresh recapitalisation and restructuring of development finance institutions (DFIs) as part of efforts to close the funding gap facing micro, small and medium-sized enterprises (MSMEs).

Deputy Governor for Economic Policy, Mr Muhammad Abdullahi, disclosed this on Tuesday while speaking at a panel session during the launch of the Nigeria Development Update by the World Bank in Abuja.

He noted that the combined asset base of Nigeria’s DFIs is just over N8 trillion, far below the estimated N130 trillion required to adequately finance MSMEs.

According to Abdullahi, simply injecting more capital into the institutions will not be enough to solve the problem. Instead, he said DFIs must be repositioned to become more bankable and attractive to investors.

He explained that the CBN, alongside the Ministry of Finance, is currently reviewing the structure of DFIs to enhance efficiency and improve their appetite for risk.

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“We are reviewing the entire sector to ensure that we can correct incentives, boost risk appetite, and strengthen capital levels,” he said.

Abdullahi added that the reform process would also focus on embedding stronger market-driven principles into the operations of the institutions, noting that previous approaches have not delivered the expected outcomes.

Addressing the broader financing gap, he said credit flow to the real sector remains a long-standing structural challenge for Nigeria’s economy, particularly in ensuring that businesses get the funding they need.

He also pointed to the recent banking sector recapitalisation, which saw lenders raise about N4.6 trillion, as a potential boost for credit expansion.

“With the N4.6 trillion raised by the banking sector, there are now more funds that must generate returns for investors. We therefore expect increased credit availability going forward,” Abdullahi said.

He, however, cautioned against directing banks to lend administratively, stressing that financial institutions must continue to rely on proper risk assessment in their lending decisions.

Abdullahi expressed optimism that a combination of stronger, better-capitalised commercial banks and reformed DFIs would significantly improve access to finance for businesses.

Nigeria’s DFIs include the Bank of Agriculture, Bank of Industry, Development Bank of Nigeria, Federal Mortgage Bank of Nigeria, National Credit Guarantee Company Limited, Nigeria Export-Import Bank, Nigerian Consumer Credit Corporation, and The Infrastructure Bank.

On March 31, the CBN concluded the banking sector recapitalisation exercise, with 33 banks meeting the new capital thresholds after raising a combined N4.65 trillion within 24 months.

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