The Rep member representing Ede North/Ede South/Egbedore/Ejigbo Federal Constituency, Mr. Bamidele Salam. Credit: HOR
The House of Representatives has urged the Federal Government to establish a special emergency funding scheme for small and medium-sized enterprises, with loans offered at single-digit interest rates to ease the burden of high borrowing costs on businesses.
It also called on the Central Bank of Nigeria to review lending policies and risk-pricing measures affecting small businesses, while urging the Federal Ministry of Industry, Trade and Investment to convene a national summit to develop practical measures for improving access to affordable credit.
The resolutions followed the adoption of a motion sponsored by the member representing Ede South/Ede North/ Ejigbo/Egbedore Federal Constituency of Osun State, Mr Bamidele Salam, during plenary on Tuesday.
Under the resolutions, the Bank of Industry and the Small and Medium Enterprises Development Agency of Nigeria would receive special funding to support affordable lending to eligible businesses.
The lawmakers also urged the CBN to consult deposit money banks, development finance institutions and SME associations to establish a transparent framework for single-digit or other concessional lending rates for productive-sector businesses without undermining financial system stability.
In addition, the House asked the industry ministry to organise an Emergency National Summit on Affordable SME Finance within 30 days. The summit is expected to bring together relevant stakeholders to agree on time-bound measures to reduce borrowing costs, simplify loan applications, accelerate disbursements and expand access to government-backed credit facilities.
Moving the motion, Salam described SMEs as central to Nigeria’s productive economy, entrepreneurship and employment generation.
He cited the 2021 National Survey of Micro, Small and Medium Enterprises, conducted jointly by SMEDAN and the National Bureau of Statistics, which found that MSMEs accounted for approximately 96.9 per cent of businesses in the country, contributed 46.32 per cent to gross domestic product and provided 87.9 per cent of employment. The sector also accounted for 6.21 per cent of exports, according to the survey.
The lawmaker said the survival and growth of small businesses depended largely on access to affordable and predictable credit for working capital, machinery, wages, inventory and expansion.
He, however, expressed concern that the cost of borrowing remained prohibitively high for many businesses despite the CBN’s reduction of the Monetary Policy Rate from 26.5 per cent to 23 per cent in September 2026.
According to him, commercial lending rates reportedly range between 20 and 46 per cent annually, making it difficult for SMEs to obtain loans without placing their operations and profitability at risk.
Salam said Nigerian businesses were also at a disadvantage compared with their counterparts in other markets where borrowing costs were lower.
He said, “In the Economic and Monetary Community of Central Africa region, the average interest rate is about 10.97%, ranging from 8.31% in Cameroon to 21.51% in Gabon. In Kenya, the rate was 16.6% in 2024, while South Africa recorded 10.7% in 2025. The United States’ Small Business Administration programme-backed loans generally fall within an 8–13% range.
“The Nigerian situation therefore places domestic enterprises at a serious competitive disadvantage, hampers investment and expansion, discourages job creation, and underscores the urgent need for targeted legislative and policy measures to reduce the effective cost of SME finance, expand credit guarantees, and strengthen access to affordable, long-term lending.”
The Osun lawmaker also cited stringent collateral requirements and extensive documentation as major obstacles preventing small businesses from accessing formal credit.
He noted that the challenges were particularly troubling given the country’s high unemployment rate, especially among young people, and the fragile state of the labour market, where SMEs play an important role in creating jobs and sustaining livelihoods.
Salam warned that expensive loans could trigger a cycle of rising costs and declining business performance. Businesses forced to borrow at high interest rates, he said, could raise the prices of their products and services to meet repayment obligations, only to lose customers as purchasing power weakens.
The resulting decline in sales and profitability could leave such enterprises struggling to repay their loans, further threatening their survival.
He also invoked Sections 16(1)(a) and 17(3)(a) of the 1999 Constitution, as amended, which respectively direct the state to promote national prosperity and an efficient, dynamic and self-reliant economy, and to ensure that citizens have opportunities to secure adequate livelihoods and suitable employment.
The proposed emergency financing scheme, alongside the planned review of lending policies, is intended to address some of the barriers confronting SMEs and improve their ability to invest, expand operations and create jobs.
The House’s intervention comes amid continuing concerns over the cost of credit for Nigerian businesses, with high interest rates limiting access to the financing many small enterprises need to remain competitive and contribute to economic growth.