Reps push for emergency loans for small businesses with low interest rates

The House of Representatives has asked the Federal Government to set up a special emergency funding program for small and medium-sized enterprises. They want loans to be given at single-digit interest rates to help reduce the burden of high borrowing costs on businesses.

They also called on the Central Bank of Nigeria to change lending rules and risk measures that affect small businesses. The House urged the Federal Ministry of Industry, Trade and Investment to hold a national summit to find practical ways to improve access to affordable credit.

These decisions came after a motion by Mr Bamidele Salam, who represents Ede South/Ede North/Ejigbo/Egbedore Federal Constituency in Osun State, was adopted during the plenary on Tuesday.

As part of these resolutions, the Bank of Industry and the Small and Medium Enterprises Development Agency of Nigeria will receive special funding to help provide affordable loans to eligible businesses.

The lawmakers also want the CBN to work with deposit money banks, development finance institutions, and SME associations. They hope to create a clear framework for single-digit and other low lending rates for productive businesses without risking the stability of the financial system.

Moreover, the House has asked the industry ministry to organize an Emergency National Summit on Affordable SME Finance within 30 days. This summit should bring together important stakeholders to come up with time-bound plans to lower borrowing costs, make loan applications easier, speed up loan disbursements, and broaden access to government-backed credit facilities.

While moving the motion, Salam highlighted that SMEs are central to Nigeria’s productive economy and job creation. He referred to the 2021 National Survey of Micro, Small and Medium Enterprises conducted by SMEDAN and the National Bureau of Statistics. The survey showed that MSMEs made up about 96.9 percent of businesses in Nigeria, contributed 46.32 percent to the gross domestic product, and provided 87.9 percent of jobs. The sector also accounted for 6.21 percent of exports.

Salam pointed out that the survival and growth of small businesses largely depend on having access to affordable and reliable credit for working capital, machinery, wages, and expansion. But he raised concerns that borrowing costs are still very high for many businesses. This is true even after the CBN reduced the Monetary Policy Rate from 26.5 percent to 23 percent in September 2026.

He noted that commercial lending rates reportedly vary between 20 and 46 percent annually. This makes it hard for SMEs to get loans without putting their operations and profits at risk.

Salam explained that Nigerian businesses face challenges compared to those in other markets where borrowing costs are lower. He said, “In the Economic and Monetary Community of Central Africa region, the average interest rate is about 10.97%, ranging from 8.31% in Cameroon to 21.51% in Gabon. In Kenya, the rate was 16.6% in 2024, while South Africa recorded 10.7% in 2025. The United States’ Small Business Administration programme-backed loans generally fall within an 8, 13% range.

“This situation puts Nigerian businesses at a serious competitive disadvantage, limits investment and growth, discourages job creation, and shows the urgent need for targeted laws and policies to cut the effective cost of SME finance, expand credit guarantees, and enhance access to affordable, long-term lending.”

The Osun lawmaker also mentioned that strict collateral requirements and a lot of paperwork are major barriers stopping small businesses from getting formal credit. He said these issues are especially concerning given the high unemployment rate in the country, particularly among young people, and the fragile job market where SMEs are key to job creation.

Salam warned that high loan costs could lead to rising expenses and poorer business performance. He said businesses forced to borrow at high interest rates might raise their prices to pay back loans, losing customers as people cannot afford to buy.

This drop in sales and profits could leave these businesses struggling to repay their loans, which threatens their survival. He also referenced Sections 16(1)(a) and 17(3)(a) of the 1999 Constitution, as amended, which require the state to promote national prosperity and a self-reliant economy, and ensure citizens have chances to secure decent jobs and livelihoods.

The proposed emergency funding program, along with the suggested review of lending policies, aims to tackle some of the challenges facing SMEs and improve their chances to invest, grow, and create jobs.

The House’s call for action comes amid ongoing worries about the cost of credit for Nigerian businesses, where high interest rates limit access to the funding many small enterprises need to stay competitive and help the economy grow.