Businesses Face Growing Pressure From High Loan Costs and Credit Constraints

Nigerian businesses remain divided over whether high borrowing costs or limited access to credit is the greater challenge to growth.

While some entrepreneurs believe lower interest rates are essential, others say they are willing to pay higher rates if financing is readily available.

Although banks have expanded lending in recent years, many business owners say affordable credit remains difficult to obtain because of strict collateral requirements and high interest rates.

The situation has been worsened by the Central Bank of Nigeria’s tight monetary policy aimed at controlling inflation, which has pushed lending rates higher.

Business owners say the rising cost of loans, including interest and other charges, has made it more difficult to expand operations and generate profits.

Some banks currently charge maximum lending rates of over 30 per cent, with certain institutions charging significantly more.

According to the 2025 World Bank Enterprise Survey, most micro, small and medium-sized enterprises (MSMEs) in Nigeria have bank accounts, but only a small proportion can access bank loans.

As a result, many businesses rely on personal savings and informal sources of funding.

An Abuja-based entrepreneur, Dipo Oluwanjobi, said access to credit is more important than the cost, noting that businesses can still make profits if funds are available when needed.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said financing challenges vary by business size.

He explained that smaller businesses often struggle to access loans due to a lack of acceptable collateral, while medium-sized firms face the burden of high borrowing costs.

Economists warn that unless lending rates fall and access to credit improves, private investment, business expansion, job creation and overall economic growth could remain under pressure.

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