The Centre for the Promotion of Private Enterprise (CPPE) has called for a comprehensive overhaul of Nigeria’s development finance framework, warning that the country’s productive sectors are grappling with a financing shortfall exceeding N50 trillion, a situation it says threatens industrialisation, food security, export diversification and job creation.

In a policy brief released on Sunday, Muda Yusuf, Chief Executive Officer of CPPE, argued that manufacturers, farmers, agribusinesses, micro, small and medium enterprises (MSMEs), and export-oriented firms are constrained by prohibitive lending rates, short loan tenors, stringent collateral requirements and inadequate long-term financing.

According to the private sector advocacy group, these challenges are symptoms of deeper structural failures within Nigeria’s financial system rather than temporary liquidity shortages.

CPPE estimated that the country’s real sector currently faces a conservative financing gap of more than N50 trillion, taking into account the unmet funding needs of manufacturing, agriculture, agribusiness, MSMEs, supply chains and export-oriented businesses.

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The organisation noted that while agriculture contributes more than one-fifth of Nigeria’s Gross Domestic Product (GDP), it has historically received less than five percent of total banking sector credit. Manufacturing, it added, requires substantial medium- and long-term financing for machinery acquisition, factory expansion, technology upgrades, energy infrastructure, automation, backward integration and export development.

“Nigeria’s real sector is confronted with a structural financing deficit characterised by prohibitive interest rates, short loan tenors, stringent collateral requirements, limited risk appetite and inadequate patient capital.

“These are not merely liquidity problems; they reflect deep-seated market failures in the financial system, including maturity mismatches, information asymmetry, sovereign crowding-out and the inability of private lenders to capture the wider economic benefits of real sector investments

“Such investments cannot be sustainably financed through short-tenor commercial bank credit at prohibitively high interest rates. Their long gestation periods and capital-intensive nature require patient, long-term financing at affordable rates, underscoring the critical role of development finance institutions and appropriately structured intervention funds,” the policy brief stated, stressing that long-term productive investments require patient capital at affordable rates.

The CPPE also linked the financing challenges to the country’s current monetary policy environment, noting that the Monetary Policy Rate (MPR) of 26.5 percent and the Cash Reserve Requirement (CRR) of 45 percent have pushed commercial lending rates beyond levels compatible with productive investments.

While acknowledging the Central Bank of Nigeria’s efforts to restore monetary policy credibility, stabilise the exchange rate and moderate inflation, CPPE argued that price stability should not come at the expense of investment and economic expansion.

“The challenge is to achieve an appropriate balance between price stability and the financing needs of the productive sectors of the economy,” Yusuf said.

According to him, excessive reliance on conventional monetary tightening underestimates the structural financing constraints confronting Nigeria’s productive sectors.

He maintained that inflation control and development finance should not be treated as conflicting objectives, particularly in an economy characterised by supply-side constraints, financing gaps and market failures.

CPPE identified several structural distortions limiting credit to the real sector, including the mismatch between short-term bank deposits and the long-term financing needs of manufacturers and agribusinesses, excessive dependence on landed property as collateral, information asymmetry between lenders and borrowers, and the crowding-out effect of government borrowing.

The organisation argued that commercial banks are naturally inclined to invest in government securities because of their attractive risk-adjusted returns rather than provide long-term financing to productive enterprises.

It further noted that manufacturing and agriculture generate broader economic benefits such as employment creation, tax revenues, food security, technology transfer, export earnings and import substitution, benefits which commercial lenders are unable to fully capture in their lending decisions.

According to CPPE, these positive externalities justify carefully designed development finance interventions.

Although it acknowledged governance concerns surrounding previous intervention programmes of the Central Bank of Nigeria, including weak repayment discipline, political interference and quasi-fiscal risks, the organisation insisted that the shortcomings should prompt reforms rather than a complete withdrawal from development finance.

It proposed a new framework that would be market-correcting instead of market-replacing, rules-based rather than discretionary, and driven by performance with stronger transparency and accountability.

Under the proposed architecture, the CPPE urged the federal government and the CBN to significantly recapitalise the Bank of Industry (BOI) and the Bank of Agriculture (BOA), expand credit guarantee schemes, establish specialised long-term refinancing windows for manufacturing and agricultural value chains, deepen supply-chain and cash-flow-based lending, improve credit information systems and mobilise pension, insurance and capital market funds into long-term productive investments.

The group also called for stronger fiscal discipline to reduce sovereign crowding-out and recommended that the CBN should focus on refinancing, risk-sharing and catalysing private sector lending rather than direct intervention lending.

CPPE argued that properly designed development finance would complement, rather than undermine, price stability by expanding productive capacity in agriculture, manufacturing, energy, logistics and storage, thereby easing structural inflationary pressures over time.

“Properly designed development finance need not conflict with the CBN’s price-stability mandate. A significant component of Nigeria’s inflation is structural and supply-driven, reflecting food-supply constraints, high energy and logistics costs, inadequate storage, low agricultural productivity and dependence on imported intermediate inputs.

“Financing that expands agricultural production, manufacturing capacity, energy efficiency, storage and logistics strengthens aggregate supply and can moderate structural inflation over time.

The critical distinction is between financing consumption, which principally expands demand, and financing productive capacity, which expands supply,” Yusuf noted

He stated also that Nigeria’s vast financing deficit cannot be addressed through conventional commercial banking alone and urged policymakers to adopt a transparent, commercially disciplined development finance framework capable of unlocking long-term capital for productive sectors while preserving monetary policy credibility.