MSMEs N500m revolving loan scheme

Recently, the Small and Medium Enterprises Development of Nigeria (SMEDAN) unveiled a N500 million revolving, zero-interest loan called “Grow Fund for Businesses” to boost small businesses across the country. The Director-General of SMEDAN, Mr. Charles Odii, announced the initiative recently in Abuja as part of activities to mark the 2026 World Micro Small and Medium Enterprises Day. The loan will be disbursed through cooperative societies, trade unions, business and registered member organisations and associations. Individual enterprises are not part of the disbursement platforms.

According to the SMEDAN boss, the decision to use association-based model is to ensure accountability, loan recovery and to make sure that the funds reach genuine business owners. In addition, the financing is designed to address one of the biggest challenges confronting small businesses in the country. The decision was also arrived at after SMEDAN’s recent countrywide consultations with market traders in the country.

SMEDAN’s interaction with owners of small businesses is a step in the right direction. This would enable SMEDAN to understand the challenges medium and small enterprises are facing, and how to design solutions for them in the present unpredictable business environment. Proper analysis of the challenges small businesses are facing will make the revolving loan achieve its objectives, as well as ensuring access to the loan and boosting working capital necessary for businesses to thrive.

It is not in doubt that MSMEs are the backbone of Nigeria’s economy, accounting for about 96 per cent of all businesses in Nigeria, according to the National Bureau of Statistics (NBS). Besides, they generate nearly half of the Nigeria’s Gross Domestic Product (GDP), and employ over 84 per cent of the workforce in the country, far above the public sector and large corporations.

By operating actively across sectors, like agriculture, retail and tech-driven services, small businesses help to reduce the nation’s reliance on oil revenue. Overall, they are the economic powerhouses, officially contributing between 48 per cent and 55 per cent of total GDP, while decreasing the level of poverty and improving general living standards of the people, particularly in the informal sector.

If the revolving loan is well-managed, it will significantly address the challenges facing small businesses in the country. These include lack of access to fund, epileptic power supply, inadequate transportation network and increased operational costs and stunt growth, as well as foreign exchange volatility and inflationary headwinds that frequently disrupt their budgeting and planning. In all, we believe that the flexibility in the repayment terms will help to drive entrepreneurship.

Although the takeoff money of N500million is too small for a country like Nigeria, it is heart-warming that the amount will be expanded through partnership with state governments and other institutions willing to provide matching grants. We urge state governments and other stakeholders to key into the scheme. The SMEDAN revolving loan scheme came a few months after the Board of Directors of African Development Bank (AfDB) approved a $200 million financing facility for the Nigeria’s Bank of Industry (BOI), to expand access to long-term financing for enterprises operating in key growth sectors of the economy.

The credit line is essentially aimed at driving Nigeria’s industrial transformation by providing funding in critical sectors, including infrastructure and transport, agro-food processing, health and pharmaceutical value chains. It will also fund green industrialisation that involves the process of transforming traditional, carbon-intensive manufacturing and economic sectors into sustainable environmental friendly operations. Also, the credit line prioritises the growth and development of SMEs, especially those owned by women and youth-led enterprises, with at least 30 per cent of the proceeds expected to benefit small businesses in the country. It will equally help ease persistent funding gaps and unlock new entrepreneurship opportunities. In addition, the facility will support climate-resilience, including renewable energy and energy-efficient industrial processes. These investments are expected to improve productivity and reduce dependence on imports chain. Undoubtedly, this will boost SMEs owned by women, and enhance BOI’s impact measurement system.

Over the last five years, AfDB had committed an estimated $261 million in targeted credit facilities and financing packages in Nigeria, specifically designed for SMEs and MSMEs. Both facilities from AfDB and SMEDAN are designed to overcome persistent “patient capital” funding gaps in key sectors of Nigerian economy, aimed at strengthening the ever-increasing role of SMEs in the economy.