The World Bank is set to approve a US$500 million loan for Nigeria on Friday to boost access to finance for micro, small and medium-sized enterprises (MSMEs), according to project documents.
The facility, known as the Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) project, aims to mobilise private capital and support innovative financial products for small businesses.
Nigeria’s federal government will be the borrower, while the Development Bank of Nigeria (DBN) will act as the implementing agency, with overall responsibility for managing the funds. Commercial lenders are expected to provide the remaining US$1.89 billion required for the project as unguaranteed financing.
World Bank documents say the project will leverage DBN and its subsidiary, Impact Credit Guarantee Limited, to expand credit access for MSMEs across the country.
Approval by the World Bank Group’s board is expected later on Friday. The US$500 million commitment forms part of an estimated total project cost of US$2.39 billion.
Of the World Bank financing, US$400 million will be provided by the International Bank for Reconstruction and Development, with a further US$100 million coming from the International Development Association.
The lender described DBN as a partner with strong implementation capacity and a proven track record in executing complex projects, saying its role would be central to the success of the initiative.
The project has three main components: the rollout of inclusive and innovative MSME finance products; the mobilisation of private capital through partial credit guarantees; and technical assistance to modernise and digitise Nigeria’s MSME finance ecosystem.
Under the first pillar, the World Bank said it would provide Tier 2 subordinated capital to eligible financial institutions and support the creation of an MSME investment fund to offer equity and long-term debt financing to small businesses.
In its appraisal report, the World Bank said Nigeria was in a “critical transition” following recent economic reforms, including the removal of fuel and foreign exchange subsidies and the unification of exchange rates.
The lender said the reforms had improved fiscal space and foreign exchange liquidity, eased inflation and helped restore investor confidence. It cited projections from the International Monetary Fund showing Nigeria’s economy growing by 3.9 percent in 2025.
Background to Nigeria’s MSME sector
Nigeria has one of the largest micro, small and medium-sized enterprise (MSME) sectors in Africa, accounting for the vast majority of businesses and a significant share of employment in the country.
According to government and multilateral estimates, MSMEs represent more than 90 percent of registered businesses in Nigeria and employ the bulk of the labour force, particularly in trade, agriculture, manufacturing and services. The sector is widely seen as critical to job creation, poverty reduction and economic diversification in Africa’s most populous nation.
Despite its scale, access to finance remains the biggest constraint facing Nigerian MSMEs. Credit to the private sector is low by regional and global standards, while many small businesses operate informally and lack the collateral, documentation and credit histories required by commercial banks.
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High inflation, volatile exchange rates and elevated borrowing costs have further tightened financing conditions in recent years. Many lenders prefer short-term government securities or large corporate clients, leaving smaller firms reliant on personal savings, informal lenders or cooperative societies.
Successive governments have launched initiatives to address the financing gap, including intervention funds, credit guarantee schemes and development finance institutions such as the Development Bank of Nigeria. However, the impact has been uneven, with limited reach beyond urban centres.
Digital finance has emerged as a partial solution, with mobile money, fintech lenders and agent banking expanding access to payments and credit, especially for micro-enterprises. Still, regulatory gaps, weak data infrastructure and high default risks continue to limit the scale of MSME lending.
Recent economic reforms backed by the World Bank and the International Monetary Fund have sought to stabilise Nigeria’s macroeconomic environment and restore investor confidence, with policymakers arguing that improved access to finance for MSMEs will be central to sustaining growth and employment.
