Bridging N40 Trillion Financing Gap: CPPE Recommends De-risking Credit Space for Small Businesses in Nigeria 

The Centre for the Promotion of Private Enterprises (CPPE) has asked monetary authorities in Nigeria to establish a framework that will enable small businesses to access more credit within the financial system.

The CPPE highlighted the financing gap in Nigeria’s Small and Medium Enterprises (SME) sector, which is estimated to be around $32.2 billion (over N40 trillion) according to IFC estimates.

In a statement, Dr. Muda Yusuf, the Chief Executive Officer of CPPE, expressed concern over the fact that small businesses contribute over 50% to the GDP but receive less than 5% of credit from the banking system. He emphasized that limited access to credit for small businesses is a significant barrier to economic growth and inclusion.

Dr. Yusuf underscored the importance of de-risking the credit space for small businesses as a means to stimulate growth, create jobs, and enhance economic inclusion.

He also raised issues regarding the high interest rate spreads between deposits and lending rates in Nigeria, which can be as high as 20%, one of the highest globally.

Additionally, he criticized the short tenure of funds in the Nigerian banking system, with over 80% of funds having a tenure of one year or less, leading to a mismatch in asset and liability tenures.

Dr. Yusuf commended the Central Bank of Nigeria (CBN) for its decision to review the minimum capital requirements for banks in the country, which had not been done since 2005.

He emphasized that adequate capitalization is essential for the efficiency and stability of the financial system.

The CBN recently directed banks to recapitalize within 24 months to meet the new minimum statutory capital requirements, which are N50 billion for International Banks, N25 billion for National Banks, and N20 billion for Regional Banks.

This move aims to ensure the financial soundness of banks, protect depositors’ funds, deepen financial intermediation, and support economic growth through investment funding.

Dr. Yusuf highlighted the impact of inflation on the value of money over time, making recapitalization necessary to safeguard depositors’ funds, strengthen financial system stability, enhance banking system resilience, and support economic growth.

He urged the CBN to monitor the banking sector to prevent predatory and anti-competitive practices resulting from the recapitalization policy.

Dr. Yusuf also called on the CBN to reassure depositors of the safety of their funds in the banking system, regardless of the current capitalization levels of banks.

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