Experts Push For Structured Merchant Financing To Unlock SME Growth, Bridge Nigeria’s Credit Gap

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Nigeria’s economic growth ambitions could remain constrained unless greater attention is paid to improving access to structured financing for small and medium-sized enterprises (SMEs), according to financial experts who argue that merchant credit is emerging as a critical tool for unlocking the sector’s vast potential.

This position was articulated by Seun Oyediran, Director of Merchant Lending at FairMoney Microfinance, who highlighted the persistent financing challenges facing SMEs despite their central role in driving economic activity across the country.

According to him, SMEs account for approximately 96 per cent of businesses in Nigeria, contribute nearly half of the country’s Gross Domestic Product (GDP), and provide more than 80 per cent of employment opportunities. Yet, many of these businesses continue to struggle to access the capital required to scale operations, manage inventories, and meet growing market demand.

He described the situation as the “missing middle” in Nigeria’s financial ecosystem, where businesses that have demonstrated commercial viability remain unable to obtain the financing needed for expansion.

“The Nigerian economic landscape is defined by the resilience of its SMEs. From busy supermarkets in Lagos to distribution networks serving rural communities, these businesses are the backbone of domestic commerce. However, access to finance remains one of the biggest barriers limiting their growth and, by extension, the growth potential of the wider economy,” Oyediran said.

Data from the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) underscores the importance of the sector. However, despite its economic significance, the International Finance Corporation (IFC) has consistently identified a substantial credit gap affecting Nigerian SMEs, leaving many businesses underserved by the formal financial system.

Analysts say the financing shortfall has become a major obstacle to business expansion, particularly at a time when enterprises are grappling with rising operating costs, inflationary pressures, foreign exchange volatility, and weaker consumer purchasing power.

Oyediran argued that merchant credit offers a practical solution to some of these challenges by providing businesses with access to working capital tailored to their operational needs.

Unlike traditional commercial loans, which often require extensive documentation and collateral, merchant financing is designed to support trade-related activities such as inventory replenishment, equipment acquisition, and business expansion.

“For many merchants, the inability to restock products translates directly into lost sales, reduced cash flow, and declining market share. Access to structured merchant financing can help bridge these short-term liquidity gaps and enable businesses to respond more effectively to market opportunities,” he noted.

The growing adoption of digital financial services is also transforming the way lenders assess SME creditworthiness. Historically, many small businesses were excluded from formal lending because they lacked conventional collateral or established credit histories.

However, advancements in data analytics and digital payments are enabling lenders to evaluate businesses based on transaction records, operational performance, and cash-flow patterns rather than solely on physical assets.

Industry stakeholders believe this shift could significantly expand access to credit for millions of entrepreneurs operating within Nigeria’s informal and semi-formal sectors.

Beyond the direct benefits to individual businesses, experts say wider access to structured financing could generate significant macroeconomic gains.

With Nigeria seeking to diversify its economy away from oil dependence, SMEs are increasingly viewed as essential drivers of industrialisation, job creation, innovation, and export growth. Improved access to financing would allow more businesses to expand production capacity, create jobs, strengthen supply chains, and contribute to economic resilience.

Oyediran stressed that supporting SMEs should go beyond policy rhetoric and focus on integrating businesses into modern credit ecosystems capable of providing flexible and responsive financing solutions.

“The difference between a local enterprise and a regional champion is often not ambition or market demand; it is access to capital. If Nigeria is serious about nurturing globally competitive businesses, then expanding access to data-driven and flexible financing must become a national priority,” he said.

Economic analysts agree that closing the SME financing gap will be critical to achieving sustainable economic growth. They argue that while government interventions and development finance initiatives have helped, greater collaboration between financial institutions, fintechs, policymakers, and private-sector stakeholders will be required to create a more inclusive lending environment.

As Nigeria continues to pursue economic diversification and private-sector-led growth, structured merchant financing is increasingly being viewed as a strategic enabler that could help transform thousands of small businesses into larger enterprises capable of driving long-term national development.