Chairman of UBA Group, Tony Elumelu, has explained why entrepreneurs frequently encounter tough conditions when applying for loans from commercial banks, pointing to increasingly strict regulatory requirements.

Speaking at a panel session during the 49th Governing Council meeting of the International Fund for Agricultural Development in Rome, Elumelu said banks are generally willing to lend but are bound by stringent compliance obligations.

He noted that obtaining credit from commercial banks usually requires meeting demanding criteria, such as providing adequate collateral and proving the capacity to repay before loans can be approved and released.

Elumelu stated that commercial banks are restricted in the amount of risk they can take on, particularly when financing small and medium-sized enterprises.

“The issue of finance, I wear a commercial bank hat. There’s a limit to what they can do in providing the kind of risk capital that SMEs or entrepreneurs need,” he said.

He added that regulatory requirements compel banks to demand sufficient collateral and verifiable repayment capacity, as failure to meet these standards can trigger capital penalties for the institution.

“If you don’t do that, there’s a charge on the bank’s capital, but people don’t understand this. So oftentimes they blame financial institutions, but the regulatory environment is tightening; it will not allow banks to provide the kind of money,” he noted.

Elumelu said this limitation partly inspired the creation of the Tony Elumelu Foundation, which offers $5,000 in non-repayable seed funding to entrepreneurs—support that commercial banks are unable to provide under existing regulatory rules.

He added that while many governments have established development finance institutions to help close the funding gap, entrepreneurs often still face challenges in accessing those funds.

“You go to some development financial institution, they will ask for an arm and a leg. Then you start wondering, how would these young entrepreneurs provide this collateral?” he added.

He noted that although DFIs were set up to provide start-up capital for businesses, their conditions frequently remain too stringent for many young entrepreneurs to meet.

Elumelu’s remarks come as credit conditions continue to evolve within Nigeria’s banking sector.

In its Q4 2025 Credit Conditions Survey, the Central Bank of Nigeria noted increased credit availability across major lending categories, despite a rise in defaults among households and businesses.
For corporate borrowers, conditions were uneven.

Loan spreads declined for small businesses, large private non-financial corporations, and other financial corporations, indicating more favorable pricing in those segments. In contrast, medium-sized PNFCs faced wider spreads, signaling tighter lending conditions.