Why banks are unable to lend to to Small and Medium Enterprises (SMEs)

By Fabian Ekeruche

Hajiya Zainab Ahmed, the Minister of State, Budget and National Planning, has linked the inability of commercial banks to lend to Small and Medium Enterprises (SMEs) to Federal Government’s indebtedness to banks via local borrowing.

Ahmed said this on Friday in Lagos while responding to questions from participants at the 5th EU–Nigeria Business Forum.

The News Agency of Nigeria (NAN) reports that the second day of the forum titled “Harnessing Nigeria’s Potential for Economic Growth’’ was dedicated to integrating SMEs into global value chain.

The major problem echoed at the forum centered on the inability of SMEs to access finance from commercial banks in the country.

However, the minister said “banks are not able to borrow to SMEs because government is heavily borrowing from them.

“80 per cent of Nigeria’s domestic debt comes from commercial banks.”

The minister said that the present administration was working with development partners and the International Finance Corporation (IFC) to ensure that it secured loans from abroad.

She explained that the government was doing everything possible to ensure real GDP growth rate of about 3-4 per cent by 2017.

She added that the Nigerian government needed the European Union to continue to support its developmental agenda.

Ahmed, on behalf of the Federal Government, then appealed to the EU to provide a European Investment Bank (EIB) centre in Nigeria.