REVEALED: Shocking reasons Nigerian businesses can’t get loans from banks

Nigeria’s banks provide loans to businesses worth only 9.4% of the country’s Gross Domestic Product (GDP), according to the African Development Bank (AfDB).

This shows that many businesses still struggle to access funding despite efforts to improve financial inclusion and economic growth.

The finding was contained in the AfDB’s 2026 African Economic Outlook report, which highlighted weak financial markets as one of the major challenges limiting development financing in Nigeria.

The report said Nigeria continues to face financing difficulties because government revenue remains low, the informal sector is large, and the financial system is not developed enough to channel sufficient funds to productive sectors.

Limited Access to Business Loans

According to the AfDB, Nigeria’s private sector credit-to-GDP ratio of 9.4% is far below levels seen in many emerging economies.

The report noted that Africa generally trails other regions in lending to businesses due to weak savings mobilisation, underdeveloped financial markets, and regulatory challenges.

It stated that much of bank lending in Africa is focused on short-term, low-risk investments rather than long-term projects that can drive economic development.

Between 2020 and 2024, Africa’s average private sector credit stood at 34.6% of GDP, the lowest globally. This compares with over 50% in South Asia and Latin America.

Among African countries, Kenya recorded 31.6%, Egypt 28.3%, Côte d’Ivoire 21.4%, while Nigeria stood at 9.4%. These figures are significantly lower than countries such as Vietnam (121.6%), Malaysia (121.5%), and Chile (111.8%).

The AfDB attributed the low lending levels to weak collateral enforcement, slow judicial processes, and strict banking regulations, which increase lending risks and discourage banks from extending credit.

The report also noted that many banks prefer investing in government securities instead of lending to businesses.

Financial Markets Remain Shallow

Beyond bank lending, the AfDB said Nigeria’s financial system remains underdeveloped.

The report revealed that Nigeria’s stock market capitalisation averaged only 11.8% of GDP between 2020 and 2024, making it one of the lowest on the continent.

Other challenges include high costs of cross-border payments and limited market depth, which discourage investment and capital inflows.

The AfDB warned that although external financing inflows are increasing, they are still insufficient to meet Nigeria’s development needs.

The bank also identified insecurity and other domestic challenges as factors weakening investor confidence and reducing the flow of private capital into the economy.

AfDB Recommends Alternative Funding Sources

To close the financing gap, the AfDB urged Nigeria to deepen its financial markets and explore alternative funding options.

The report recommended greater use of:

Green bonds

Public-private partnerships (PPPs)

Blended finance structures

Debt-for-development swaps

It also called for stronger collaboration with development finance institutions to improve revenue generation and ensure more efficient use of resources.

According to the AfDB, stronger financial markets and better capital mobilisation will be essential for funding infrastructure, supporting businesses, and sustaining economic growth.

What You Should Know

Recent data showed that Nigeria’s private sector credit dropped by more than N14 trillion in just two months, falling from N94.61 trillion in February 2026 to N80.59 trillion in April 2026.

The decline highlights ongoing weaknesses in lending to productive sectors, even as the Central Bank of Nigeria (CBN) continues efforts to support economic growth while managing inflation.