The Central Bank of Nigeria has announced plans to recapitalise and restructure development finance institutions to help bridge the growing financing gap for micro, small, and medium enterprises.

Deputy Governor for Economic Policy, Muhammad Sani Abdullahi, disclosed this during a panel at the launch of the World Bank’s Nigeria Development Update in Abuja on Tuesday.

He noted that a recent CBN review found that the current capacity of DFIs falls short of meeting the credit demands of businesses.

“We did a review last year around the whole development finance space. And out of all the DFIs in Nigeria, what we have is a total asset base of over N8 trillion, whereas what is really required in terms of development finance for MSMEs is over N130 trillion,” he said.

He emphasized that the substantial shortfall underscores the need for reforms that extend beyond mere capital injections.

“The only way to do it is not only through public sector injecting capital in these agencies, but it’s also to make them bankable, to make them investable,” he noted.

Abdullahi stated that the CBN is collaborating with the Ministry of Finance to restructure DFIs, aiming to enhance their efficiency and impact.

“We’re looking at that entire sector to ensure that we can correct the incentives, improve the risk appetite, and also ensure that capital is improved,” he said.

He further stated that the reforms are designed to incorporate more robust market-oriented principles into DFI operations.

“We’re looking at it structurally to see how more market fundamentals can go into these things because the way it’s been done in the past has not worked,” he stated.

The CBN official connected the reform initiative to the recent recapitalisation of the banking sector, saying it would boost lending capacity across the system.

“Now, with the N4.6 trillion raised by the banking sector, there’s a lot more funds that have to return ROI for their investors. And so we envisage going forward that there’ll be a lot more credit that’s available,” he said.

He stressed, however, that the apex bank would not dictate to banks where to allocate their loans.

“What we do want to shy away from very strongly is this administratively directed credit… you cannot direct banks to lend to particular businesses. Banks have to do their own risk assessments,” Abdullahi said.

Abdullahi reiterated that limited access to finance continues to be a major challenge for businesses, especially micro, small, and medium enterprises.

“I think lending to the real sector has always been one of the structural challenges that Nigeria’s economy faces in terms of how to get that credit to the businesses that require it,” he said.