How Loans Could Transform Nigeria

How Loans Could Transform Nigeria

How Loans Could Transform Nigeria


3 min read

Abuja, Nigeria

Posted on: 11th July 2016



Temitayo Adeuja is the proud owner of this small day care. She has poured love and money into this budding business, while also holding down a full time job. “I wanted a bigger space,” she tells me, “not just a crèche, but a primary school too… that’s what I dreamt of, that’s what I wanted, but funding has been a challenge for the business.” Relying on savings to get her business off the ground, she knows she will not be able to realise her ambitions unless she gets a bank loan to expand her business. 

Her story is not unique. It is very difficult for small business owners in Nigeria to get the finance they need to expand beyond the start-up stage.

Temitayo Adeuja at her daycare in Abuja, Nigeria. 

There are an estimated 31 million small scale enterprises in the country, and they need to be able to borrow money if they are to expand.

The scale of the challenge is huge. Development programmes have been spectacularly successful at supporting entrepreneurs in Nigeria, but banks have been slow to follow suit. The financial infrastructure that entrepreneurs in the developed world are familiar with does not exist here. It’s very difficult for a start-up to get a loan, and those that do face high demands for collateral and restrictive repayment deadlines.

“Businesses have crumbled because of lack of finance”, says Doyin Olufemi, the founder of the business support service Box Office. Young entrepreneurs, he explains, do not have houses to use as collateral, and they need on average longer than 6-12 months to turn a profit. He tells me how many “have to pack up their businesses” because of these restrictive conditions.

The Development Bank of Nigeria aims to change that

The Development Bank of Nigeria aims to change that

The Development Bank of Nigeria is a new bank has been set up specifically to provide loans to small businesses. It aims to give loans to over 200,000 small businesses in the first five years, and to provide this medium to long term funding at reasonable rates. In other words, just the kind of loans that people, like Temi, need.

But the bank hopes to do even more, it aims to help change the financial landscape in Nigeria.  Tunde Ladipo, our Country Head for Effective Governance in Nigeria, explains how the bank is designed to act as a catalyst which could transform the economy. 

Once the Development Bank shows that it is possible to give loans to these small businesses for a long period and at reasonable rates,” he says, “banks will buy into it. And once that happens, we will see a lot of development in Nigeria.

It’s now more important than ever to support entrepreneurs.

Since the collapse in commodity prices, the resulting fall in government revenues and the fluctuations in the value of the naira, supporting entrepreneurship in Nigeria has become more important than ever. “Small and medium sized businesses drive the economy in Nigeria,” Tunde explains.

Providing funding to small business owners will help create jobs and strenghten the economy.

These are challenging times for Nigeria’s economy. So there is urgency, but there is also hope. Reflecting on the work he has done, and the bank’s huge potential impact Tunde says, “I started from the very onset and it’s like seeing a baby grow and now taking foot. I am quite proud of it and also the impact it’s going to have in the country.” Doyin, Temi and millions of other Nigerian entrepreneurs are eagerly hoping so too.  

The work described here was carried out by the Tony Blair Africa Governance Initiative, it is now being continued by the Tony Blair Institute for Global Change.

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