CBN Demands Recapitalisation of DFIs to Bridge N230tn Gap
The Central Bank of Nigeria (CBN) has declared the country’s development finance sector critically undersized and in urgent need of a total overhaul. Speaking at the World Bank’s Nigeria Development Update in Abuja, CBN Deputy Governor Mohammed Sani Abdullahi revealed a staggering ₦230 trillion financing gap for micro, small, and medium enterprises (MSMEs). Nigeria’s current Development Finance Institutions (DFIs), including the Bank of Industry and the Development Bank of Nigeria, possess a combined asset base of just ₦8 trillion. This massive deficit leaves the backbone of the Nigerian economy without the credit necessary to drive industrial growth or job creation.
The apex bank is explicitly rejecting a return to “administratively directed credit,” where commercial banks are forced to lend to specific sectors. Abdullahi argued that such policies have historically failed because they ignore the risk appetite and independent assessments of private lenders. Instead, the CBN wants to make DFIs “bankable and investable” to attract private sector capital. The goal is to move beyond mere government bailouts toward a market-driven system that can deploy capital at a scale far beyond the reach of the public treasury.
Structural decay and poor governance currently hobble many of these institutions. High levels of non-performing loans have drained the lending capacity of agencies like the Bank of Agriculture and the Federal Mortgage Bank of Nigeria. The CBN and the Ministry of Finance, as major shareholders, are now reviewing the entire sector to correct distorted incentives and strengthen risk management. Without these reforms, officials warn that simply injecting new capital would be akin to pouring water into a leaky bucket.
Despite the credit squeeze and high interest rates, Nigerian business activity has shown surprising resilience in early 2026. The Purchasing Managers’ Index (PMI) remains above the 50-point threshold, indicating that the private sector is still expanding. This appetite for growth suggests that if the financing gap were bridged, the economic payoff would be substantial. The World Bank corroborated this view, noting that Nigeria’s external reserves and exchange rate stability have improved significantly following recent macroeconomic reforms.
The World Bank’s Lead Economist, Fiseha Haile, warned that while the “macro-fundamentals” are stronger, the economy remains vulnerable to external shocks. Global interest rates and the ongoing conflict in the Middle East threaten to raise borrowing costs and reduce foreign investment. To counter these risks, the Bank recommends keeping monetary policy tight to anchor inflation while introducing supply-side reforms. One key proposal includes reopening fuel imports to restore competition and lower the energy costs that currently handicap Nigerian manufacturers.
The path to closing the ₦230 trillion gap relies on a difficult transition from state-led lending to a sophisticated, private-sector-aligned development finance model. The government is betting that a more transparent and efficient DFI sector will serve as a magnet for the trillions in idle domestic and international capital. If successful, this restructuring could transform the MSME sector from a struggling survivalist tier into a primary engine of national wealth.