Nigeria: CBN Targets DFI Recapitalisation to Unlock MSME Financing

The Central Bank of Nigeria has unveiled plans to recapitalise and restructure Development Finance Institutions (DFIs) as part of a broader strategy to address Nigeria’s persistent credit gap for micro, small and medium enterprises (MSMEs).

Speaking at the launch of the World Bank Nigeria Development Update in Abuja, Deputy Governor for Economic Policy, Muhammad Sani Abdullahi, disclosed that a recent assessment revealed a significant mismatch between available funding and demand.

According to him, DFIs currently operate with an asset base of approximately ₦8 trillion—far below the estimated ₦130 trillion required to adequately meet MSME financing needs.

Abdullahi emphasised that addressing the gap will require more than public capital injections. Instead, the CBN is pursuing structural reforms aimed at making DFIs more attractive to private investment and better aligned with market principles.

“The focus is not just on recapitalisation, but on making these institutions bankable and investable,” he noted, adding that the apex bank is working closely with the Ministry of Finance to redesign governance frameworks, strengthen incentives, and enhance risk-taking capacity.

The reform agenda builds on the recent banking sector recapitalisation exercise, which raised approximately ₦4.65 trillion. Regulators expect this to improve overall lending capacity within the financial system, while encouraging banks to adopt more independent, risk-based credit decision-making processes.

Despite ongoing constraints, Abdullahi highlighted signs of resilience in the real sector, noting that Nigeria’s Purchasing Managers’ Index (PMI) has remained above the 50-point threshold—indicating continued business expansion even amid elevated borrowing costs.

He acknowledged, however, that access to finance remains a structural bottleneck for MSMEs, which form the backbone of Nigeria’s economy. The CBN believes that a combination of stronger commercial banks and reformed DFIs could significantly improve credit flows to underserved businesses.

The proposed reforms signal a shift toward a more market-driven development finance model, aimed at unlocking sustainable funding and supporting long-term economic growth.