Nigeria’s development-finance shortfall has exceeded N50 trillion, the Centre for the Promotion of Private Enterprise (CPPE) said, warning that prolonged monetary tightening by the Central Bank of Nigeria is making it harder for productive businesses to secure funding.
Key takeaways
- CPPE puts the unmet financing requirement across key real-sector industries above N50 trillion.
- The central bank’s 26.5% Monetary Policy Rate and 45% Cash Reserve Requirement have pushed lending costs beyond the viable returns of many investments.
- The group said tighter policy has also helped strengthen exchange-rate stability, curb inflationary pressures and rebuild monetary-policy credibility.
- CPPE wants the Bank of Industry and Bank of Agriculture to receive substantial new capital and become stronger providers of long-term funding.
- The CBN has reduced its development-finance interventions under Governor Olayemi Cardoso while concentrating on price and monetary stability.
Funding gap weighs on productive sectors
Muda Yusuf, CPPE’s chief executive, said in a weekend statement that relying too heavily on standard monetary-policy tools could weaken investment and expansion in sectors that generate output, jobs and exports.
The organisation said Nigeria’s financing needs are too large for commercial banks to carry the burden of industrial development and agricultural transformation alone. Its estimate covers unmet requirements in manufacturing, farming, agribusiness, micro, small and medium-sized enterprises, supply networks and export-focused companies.
CPPE called on the CBN to reconsider what it described as a withdrawal from development finance. It also urged the central bank and the Federal Government to inject significant fresh capital into the Bank of Industry and the Bank of Agriculture so they can help close the funding deficit.
The group said the monetary-policy backdrop had intensified the problem. With the policy rate at 26.5% and banks required to hold 45% of deposits as reserves, borrowing costs in the commercial market are generally too high to match the returns available from many productive projects.
Balancing stability with investment
CPPE acknowledged the CBN’s efforts to restore confidence in monetary policy. It said the extended tightening cycle had delivered gains, including greater policy credibility, a more stable exchange rate and some easing of inflationary pressure. The organisation said those improvements should be protected.
At the same time, it argued that monetary stability should support wider economic goals rather than stand apart from them. Investment, productivity, employment and durable growth all depend on finding a workable balance between controlling prices and meeting the financing requirements of businesses in the real economy.
The think tank cautioned that viewing price control and development finance as opposing priorities could obstruct Nigeria’s economic transformation. It said conventional monetary orthodoxy can overlook the structural funding barriers facing productive industries.
In an economy marked by large financing shortages, market failures and serious supply constraints, CPPE said monetary stability should be supplemented by targeted development-finance programmes. Such support, it argued, must be transparent, carefully administered and designed to avoid fuelling inflation, with priority given to manufacturing, agriculture, agribusiness and other strategically important sectors.
The organisation said policymakers face a difficult trade-off: interest rates and other monetary conditions may need to remain restrictive enough to bring inflation under control, while companies require affordable, long-term capital to increase investment, production and employment.
CPPE said it was not realistic to expect ordinary commercial-bank lending to fund Nigeria’s industrialisation and agricultural modernisation by itself. It called for a review of the apparent retreat from development finance, while stopping short of advocating a return to direct, discretionary intervention lending.
It also recommended that development-finance institutions be recapitalised, expanded and reinforced, with the Bank of Industry and Bank of Agriculture serving as the main conduits for long-term funding to productive sectors.
Since Olayemi Cardoso became CBN governor, the central bank has scaled back its development-finance programmes as part of a broader effort to concentrate on its core responsibility for price stability and monetary conditions.
