• Reforms aim to improve efficiency, attract investment, boost lending
• Move follows bank recapitalization and push to support real sector

Nigeria’s central bank plans to recapitalize and restructure development finance institutions (DFIs) to address a widening funding gap for micro, small and medium-sized enterprises (MSMEs), estimated at more than 130 trillion naira ($94.3 billion).

The announcement was made by Central Bank of Nigeria (CBN) Deputy Governor for Economic Policy Muhammad Sani Abdullahi at a roundtable held during the launch of the World Bank’s Nigeria Development Update report in Abuja on Tuesday, April 7.

Abdullahi said a recent CBN study found that the current size of DFIs, with total assets exceeding 8 trillion naira, is far below actual SME financing needs. The gap between available resources and demand highlights the urgency of reforms that go beyond capital injections and aim to make these institutions more commercially viable and attractive to investors.

“We conducted a review last year of the development finance space. Across all the DFIs in Nigeria, the total asset base is slightly above N8trn, whereas what is required in development finance for MSMEs is over N130tn. The only way to address this is not only through public sector capital injections into these institutions, but also by making them bankable and investable,” he said.

Structural approach to strengthening DFIs

The CBN and the Ministry of Finance are working on restructuring DFIs to improve their efficiency and ability to mobilize capital, Abdullahi said. The planned reforms will focus on incentive systems, risk appetite and capital levels, with the aim of applying stronger market discipline and moving away from ineffective past approaches.

The reforms are expected to better align DFI operations with market fundamentals and strengthen their role in financing the real sector. They should also increase the flow of credit, complementing commercial banks, which have recently increased their capital base.

The restructuring plan follows the recent recapitalization of Nigeria’s banking sector. The CBN said 33 banks met minimum capital requirements under a program completed on March 31, 2026. A total of 4.65 trillion naira was raised over 24 months, of which 72.55% came from domestic sources.

Nigeria has about six development finance institutions operating across key sectors, including agriculture, industry and infrastructure.

Chamberline Moko