The House of Representatives has called on the Federal Government to establish a special emergency financing scheme for small and medium-sized enterprises (SMEs), with loans offered at single-digit interest rates to ease the burden of high borrowing costs on Nigerian businesses.

The lawmakers also urged the Central Bank of Nigeria (CBN) to review lending policies and risk-pricing measures affecting small businesses, while calling on the Federal Ministry of Industry, Trade and Investment to convene an emergency national summit to develop practical solutions to the challenges limiting access to affordable credit.

The resolutions followed the adoption of a motion sponsored by Bamidele Salam, the lawmaker representing Ede South, Ede North, Egbedore and Ejigbo Federal Constituency of Osun State, during plenary on Tuesday.

Under the proposed intervention, the Bank of Industry (BoI) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) would receive special funding to provide affordable loans to eligible businesses.

The House further 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 businesses in productive sectors.

The framework, according to the lawmakers, should reduce borrowing costs without undermining the stability of the financial system.

The House also asked the Ministry of Industry, Trade and Investment to organise an Emergency National Summit on Affordable SME Finance within 30 days.

The proposed summit is expected to bring together relevant stakeholders to agree on time-bound measures to lower lending costs, simplify loan application procedures, accelerate disbursements and expand access to government-backed credit facilities.

Reps Raise Concerns Over High Lending Rates
Moving the motion, Salam described small and medium-sized enterprises as critical drivers of 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 Nigeria.

According to the survey, the sector contributed 46.32 per cent to the country’s gross domestic product, provided 87.9 per cent of employment and accounted for 6.21 per cent of exports.

Salam said the survival and expansion of small businesses depended largely on access to affordable and predictable credit to finance working capital, purchase machinery, pay workers, maintain inventory and expand operations.

However, he expressed concern that borrowing costs 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.

The lawmaker said commercial lending rates reportedly ranged between 20 and 46 per cent annually, making it difficult for SMEs to obtain loans without putting their operations and profitability at risk.

He argued that the high cost of borrowing placed Nigerian businesses at a disadvantage compared with enterprises in other economies where interest rates were lower.

Citing regional and international comparisons, Salam said the average interest rate in the Economic and Monetary Community of Central Africa was about 10.97 per cent, ranging from 8.31 per cent in Cameroon to 21.51 per cent in Gabon.

He added that Kenya recorded an interest rate of 16.6 per cent in 2024, while South Africa recorded 10.7 per cent in 2025.

The lawmaker also cited loans backed by the United States Small Business Administration, which he said generally attracted interest rates of between eight and 13 per cent.

According to him, the disparity in borrowing costs undermined the competitiveness of Nigerian businesses and limited their capacity to invest, expand and create jobs.

Salam said, “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.”

Collateral Requirements, Documentation Hinder SMEs
The Osun lawmaker also identified stringent collateral requirements and extensive documentation as major obstacles preventing small businesses from accessing credit through formal financial institutions.

He said the challenges were particularly concerning given Nigeria’s unemployment situation, especially among young people, and the fragile state of the labour market.

According to him, SMEs play a significant role in creating employment opportunities, supporting entrepreneurship and sustaining livelihoods across the country.

Salam warned that high borrowing costs could trigger a cycle of rising operating expenses and declining business performance.

He explained that businesses compelled to borrow at high interest rates might increase the prices of their products and services to meet repayment obligations.

However, such increases could drive away customers whose purchasing power had been weakened by prevailing economic conditions.

The resulting decline in sales and profitability could make it more difficult for businesses to repay their loans, further threatening their survival.

The lawmaker argued that reducing borrowing costs and simplifying access to financing would help businesses maintain operations, improve productivity and create more employment opportunities.

House Cites Constitutional Provisions
In advancing the motion, Salam also referred to Sections 16(1)(a) and 17(3)(a) of the 1999 Constitution, as amended.

Section 16(1)(a) provides for the promotion of national prosperity and an efficient, dynamic and self-reliant economy, while Section 17(3)(a) addresses the state’s responsibility to ensure that citizens have opportunities to secure adequate means of livelihood and suitable employment.

The lawmaker said the proposed emergency financing scheme and the review of existing lending policies were intended to address some of the structural barriers confronting small businesses.

If implemented, the measures could improve access to credit for eligible enterprises, enabling them to invest in equipment, expand production, sustain existing jobs and recruit additional workers.

The proposed national summit is also expected to provide a platform for the government, financial institutions and business associations to develop practical and time-bound solutions to the challenges facing SME financing.

The House’s intervention comes amid continuing concerns over the cost of credit in Nigeria, with high interest rates and restrictive lending conditions limiting the ability of many small businesses to secure the funds needed to remain competitive.

Although the resolutions set out proposed measures to improve access to affordable financing, their impact will depend on the Federal Government’s response, the implementation of any approved funding arrangements and the lending framework eventually developed by the relevant institutions.