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LAGOS – The fate of Nigeria’s real sector experiencing a strong rebound seems to be an uphill task as it has been revealed that the country’s productive sectors are grappling with a financing gap estimated at over N50 trillion.
As a result, there is a need for a comprehensive overhaul of Nigeria’s development finance framework to prevent a situation that threatens industrialisation, food security, job creation and long-term economic growth.
The Centre for the Promotion of Private Enterprise (CPPE), in a policy brief titled ‘Development Finance and the Real Sector’, the private sector advocacy group argued that while the Central Bank of Nigeria’s (CBN) monetary tightening measures have helped restore macroeconomic stability and strengthen confidence in monetary policy, they have also widened the financing constraints confronting manufacturers, farmers, agribusinesses, exporters and Micro, Small and Medium Enterprises (MSMEs).
The CPPE, led by its Chief Executive Officer, Dr. Muda Yusuf, maintained that Nigeria’s productive economy requires a new development finance architecture that addresses structural market failures without undermining the CBN’s commitment to price stability.
According to the organisation, the financing challenges facing the real sector go far beyond liquidity shortages, describing them as deep-rooted structural deficiencies in the financial system.
It identified prohibitively high lending rates, short loan tenors, excessive collateral requirements, weak risk appetite among lenders and inadequate access to long-term patient capital as major obstacles preventing businesses from expanding production and investing in critical infrastructure.
CPPE estimated that the cumulative unmet financing needs across manufacturing, agriculture, agribusiness, supply chains, export-oriented businesses and MSMEs exceed N50 trillion.
It noted that agriculture, despite contributing more than one-fifth of Nigeria’s Gross Domestic Product (GDP), has historically received less than five percent of total banking sector credit. Similarly, manufacturers continue to struggle in accessing affordable long-term financing required for factory expansion, acquisition of machinery, automation, technology upgrades, energy infrastructure, backward integration and export development.
According to the organisation, such investments require long gestation periods and cannot be sustainably financed through short-term commercial bank loans priced at prevailing market rates.
The policy brief also highlighted the impact of Nigeria’s current monetary environment on productive investments. With the Monetary Policy Rate (MPR) standing at 26.5 percent and the Cash Reserve Ratio (CRR) for deposit money banks fixed at 45 percent, CPPE argued that commercial lending rates have become largely incompatible with the expected returns on productive investments.
The group, however, acknowledged that the CBN’s tight monetary policy has yielded positive outcomes, including stronger monetary policy credibility, improved exchange rate stability and moderating inflationary pressures.
It stressed that these gains should be preserved but insisted that monetary stability should ultimately support broader economic objectives such as investment, productivity, employment generation and sustainable growth.
CPPE warned that excessive reliance on conventional monetary orthodoxy could underestimate the structural financing constraints facing Nigeria’s productive sectors.
It argued that price stability and development finance should not be treated as conflicting objectives, insisting that carefully designed and transparently managed intervention programmes can complement rather than weaken monetary policy.
According to the organisation, Nigeria’s policy challenge lies in maintaining sufficiently tight monetary conditions to tame inflation while simultaneously providing affordable, long-term financing needed to expand production, create jobs and stimulate exports.
“The solution is not indiscriminate monetary expansion,” the report stated. “Rather, it is a carefully designed development finance framework targeted at correcting identifiable market failures while preserving monetary policy credibility.”
CPPE further argued that expecting conventional commercial banks alone to finance Nigeria’s industrialisation agenda is unrealistic because banks largely depend on short-term deposits, while manufacturers and agribusinesses require financing spanning between five and ten years or even longer.
It described this maturity mismatch as one of the biggest structural barriers limiting long-term investments in the economy.
The organisation also pointed to information asymmetry and rigid collateral requirements as major impediments to lending.
According to CPPE, many viable businesses possess strong cash flows, inventories, receivables, purchase orders and productive assets but are unable to access credit because they cannot provide landed property or traditional bank guarantees demanded by lenders.
It equally identified sovereign crowding-out as another major challenge, explaining that the attractive returns available on government securities often discourage banks from extending credit to the real sector. The policy paper further argued that manufacturing and agribusiness generate significant economic benefits beyond private financial returns.
These include employment creation, increased tax revenues, technology transfer, food security, export earnings, import substitution and foreign exchange conservation.
Because these wider benefits are not fully reflected in commercial lending decisions, CPPE said productive sectors remain systematically underfunded, thereby justifying targeted development finance interventions.
While acknowledging shortcomings associated with previous CBN intervention programmes, including governance lapses, poor loan recoveries, political interference and quasi-fiscal risks, the organisation insisted that these weaknesses should lead to reforms rather than the abandonment of development finance.
According to CPPE, Nigeria does not require a return to large discretionary intervention funds but instead needs a modern framework that is rules-based, market-correcting, transparent and shielded from political influence.
It proposed that the CBN should function primarily as a catalyst, refinancer and risk-sharing institution, while development finance institutions and participating financial institutions handle credit appraisal, loan disbursement and recovery.
The organisation recommended significant recapitalisation of the Bank of Industry and the Bank of Agriculture to strengthen their capacity to provide long-term financing to productive sectors.
It also urged the authorities to expand partial credit guarantees, establish specialised refinancing windows for manufacturing and agriculture, deepen supply-chain and warehouse receipt financing, promote movable collateral frameworks and improve credit information systems through technology-driven risk assessment.
Other recommendations include mobilising pension funds, insurance assets and capital market resources into long-term productive investments, reducing government’s domestic borrowing to minimise crowding-out, and institutionalising strong governance, transparency and independent performance evaluation for development finance programmes.
CPPE further argued that well-targeted financing for agriculture, manufacturing, storage, logistics and energy infrastructure would expand productive capacity and help moderate Nigeria’s largely structural inflation over time.
It maintained that financing productive investments differs fundamentally from financing consumption, as the former increases supply while the latter mainly fuels demand.
The organisation concluded that Nigeria’s massive real-sector financing deficit cannot be addressed through conventional commercial banking alone. It called on policymakers to embrace a middle path between unrestricted intervention lending and a complete withdrawal from development finance.
According to CPPE, a transparent, commercially disciplined and market-driven development finance framework is essential for unlocking private investment, accelerating industrialisation, boosting agricultural transformation, strengthening food security, expanding exports and improving Nigeria’s long-term economic competitiveness.
