Nigeria Seeks Fresh $500m World Bank Loan to Boost MSMEs

The Federal Government is in talks with the World Bank to secure a fresh $500 million loan aimed at supporting the growth of Micro, Small, and Medium Enterprises (MSMEs) across the country. The facility, government officials say, is part of efforts to strengthen Nigeria’s economic base, drive job creation, and enhance productivity in critical non-oil sectors.

According to sources in the Federal Ministry of Finance, discussions with the global financial institution have reached an advanced stage, with the facility expected to be disbursed under the World Bank’s Nigeria for Women and MSME Competitiveness Programme, which focuses on expanding access to finance, improving business climate reforms, and promoting digital innovation among small enterprises.

The loan, which will be implemented in partnership with the Bank of Industry (BoI) and other development finance institutions, is designed to provide affordable financing and capacity-building support for MSMEs across various sectors, including manufacturing, agriculture, information technology, creative industries, and renewable energy.

Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Wale Edun, confirmed the development in Abuja, noting that the facility aligns with the government’s broader economic reforms aimed at stimulating productivity and empowering small businesses to play a greater role in the national economy.

“Micro, Small, and Medium Enterprises are the backbone of Nigeria’s economy. They contribute significantly to GDP and employment. This partnership with the World Bank will provide them with the resources they need to scale up operations, innovate, and create jobs,” Edun said.

He added that the government was prioritising programmes that would make MSMEs more resilient and competitive in both domestic and export markets. “Our focus is on removing barriers that constrain small businesses — from limited access to finance and poor infrastructure to high operational costs and regulatory bottlenecks,” the minister explained.

According to the National Bureau of Statistics (NBS), MSMEs account for over 96% of businesses and 84% of total employment in Nigeria. However, many face challenges related to inadequate funding, low productivity, and limited market access, problems that the proposed loan seeks to address.

The World Bank’s Country Director for Nigeria, Dr. Shubham Chaudhuri, noted that the new credit line would complement ongoing interventions such as the $750 million Nigeria COVID-19 Action Recovery and Economic Stimulus (NG-CARES) and the Nigeria Digital Economy for Job Creation Project, both of which aim to build resilience and enhance job opportunities.

He explained that the $500 million facility will focus on improving financial inclusion, particularly for women-led and youth-owned businesses, by working with financial institutions to extend loans at lower interest rates and longer repayment periods.

“Small businesses are at the heart of inclusive growth. By providing access to finance, technology, and training, we are helping Nigerian entrepreneurs expand their businesses and strengthen value chains that create sustainable jobs,” Chaudhuri said.

A senior official at the Bank of Industry, who spoke on condition of anonymity, said the new facility would build on the success of earlier interventions funded by the World Bank and other partners. He disclosed that the BoI had successfully managed over $300 million in similar MSME-focused programmes, achieving significant results in manufacturing, agribusiness, and digital entrepreneurship.

“The new $500 million facility will be catalytic in scaling up support for entrepreneurs across the country. It will also provide technical assistance to improve governance, financial literacy, and export readiness,” the official stated.

Economic experts have commended the move but advised the government to ensure proper transparency and monitoring in the utilisation of the loan. According to Dr. Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise (CPPE), channeling the funds effectively into productive sectors could accelerate Nigeria’s industrial growth and job creation.

“Access to affordable finance remains one of the biggest challenges facing small businesses. This facility, if well implemented, can unlock significant opportunities for inclusive economic growth,” Yusuf said. “However, the government must ensure accountability and prevent leakages that have undermined past interventions.”

He added that beyond funding, improving infrastructure and creating an enabling environment for MSMEs should remain a policy priority. “No amount of credit can solve the problems of small businesses if power, logistics, and regulatory costs remain high,” he noted.

The government also revealed plans to align the loan programme with its Renewed Hope Agenda, which prioritises private sector growth as a key driver of economic diversification and employment. Under this framework, the Ministry of Industry, Trade, and Investment, in collaboration with state governments, will identify and support high-potential enterprises across the six geopolitical zones.

Similarly, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) said it would work closely with stakeholders to ensure that the funds reach credible enterprises capable of driving measurable economic impact. The Director-General of SMEDAN, Charles Odii, described the initiative as a game changer for Nigeria’s small business ecosystem.

“This partnership will not only provide financing but also build the capacity of small business owners through digital skills training, business planning, and access to markets. It represents a holistic approach to enterprise growth,” Odii said.

The proposed $500 million loan comes amid Nigeria’s growing public debt, which stood at N121.67 trillion ($91.46 billion) as of June 2025, according to the Debt Management Office (DMO). Critics have urged the government to exercise caution in accumulating new debt, but officials insist that concessional facilities like the World Bank loan are essential for driving development.

Unlike commercial loans, World Bank facilities typically have longer repayment periods and lower interest rates, making them more sustainable for developing economies. Finance Ministry officials have maintained that the benefits of the MSME loan far outweigh the risks, citing its direct link to employment generation and poverty reduction.

Experts also argue that empowering MSMEs through targeted interventions could help Nigeria achieve broader macroeconomic stability by boosting productivity and diversifying exports away from crude oil.

As negotiations advance, the Ministry of Finance is expected to submit the loan proposal to the Federal Executive Council (FEC) and subsequently to the National Assembly for approval before disbursement begins.

If implemented effectively, analysts believe the World Bank loan could mark a turning point for Nigeria’s MSME sector, unlocking growth, fostering innovation, and strengthening the foundation for a more inclusive and diversified economy.