NCGC launches N100bn credit guarantee scheme to tackle N4trn MSME funding gap

The National Credit Guarantee Company Limited (NCGC) has officially commenced operations with an initial capital of ₦100 billion, positioning itself as a key catalyst to address Nigeria’s chronic credit access challenges.

Speaking at the inaugural Stakeholders’ Engagement Forum in Lagos, NCGC Managing Director, Bonaventure Okhaimo announced that the company will provide partial credit guarantees to reduce lending risks for financial institutions, particularly targeting micro, small and medium enterprises (MSMEs), local manufacturers, and consumer credit markets.

The establishment of NCGC comes amid severe credit constraints hampering Nigeria’s economy. According to the National Bureau of Statistics (NBS), 80% of MSMEs lack access to formal credit despite contributing 48% of the country’s GDP. This funding gap has been worsened by surging inflation, a 27.5% benchmark interest rate, and volatile exchange rates. In 2023 alone, 767 manufacturing firms closed operations, resulting in over 18,000 job losses.

“Our mandate is clear: we are here to play the crucial role of a guarantor of loans, thereby reducing risks for lenders and encouraging increased credit availability,” Okhaimo told banking executives and industry stakeholders. He explained that NCGC will operate as a risk-sharing mechanism rather than a direct lender, providing partial coverage for potential loan defaults to encourage financial institutions to extend credit to underserved sectors.

The scheme represents a significant intervention in Nigeria’s underdeveloped credit ecosystem. Consumer credit currently stands at ₦4.12 trillion as of January 2025, accounting for only 15.5% of total bank credit and less than 3% of GDP. Despite rising financial inclusion—up from 54% in 2020 to 64% in 2023—around 26% of Nigeria’s adult population remains excluded from formal financial services, according to EFInA’s Access to Finance survey.

Established under President Bola Ahmed Tinubu’s administration, NCGC was created with foundational backing from the Ministry of Finance Incorporated (MOFI), the Bank of Industry (BOI), Credicorp Limited, and the Nigeria Sovereign Investment Authority (NSIA). The World Bank provided technical assistance in developing the company’s business plan and operational framework, while the Central Bank of Nigeria (CBN) continues to offer regulatory guidance.

“We invite financial institutions and partners to join us in building a future where credit is accessible, risk is shared, and growth is inclusive,” Okhaimo said, stressing the collaborative approach required to transform Nigeria’s credit market. He noted that the company aims to complement existing efforts by Development Finance Institutions (DFIs) and initiatives like CrediCorp, which has already enabled over 90,000 beneficiaries to access structured consumer credit since April 2024.

The NCGC launch comes as Nigeria struggles with one of the lowest credit-to-GDP ratios among major economies. In 2023, private sector credit accounted for just 17.59% of GDP, compared to 90.55% in South Africa and 189.61% in China. This structural gap has long constrained inclusive growth, especially within industrial and MSME sectors.

“The concept of credit guarantees is not new globally, but its formal institutionalization in Nigeria marks a pivotal shift in our financial architecture,” said Dr. ‘Biodun Adedipe, founder of BAA Consult, during the event. He explained that a credit guarantee involves a guarantor – typically a financial institution or government agency – undertaking to cover part of a borrower’s debt in case of default, thereby reducing lending risks.

Dr. Adedipe, however, cautioned that transparency, accountability, and insulation from political interference would be critical to the success of the scheme. “Perhaps the greatest risks are moral hazard and political interference,” he warned. “If well implemented, the credit guarantee model can operate profitably, spur long-term lending, deepen the country’s credit infrastructure, and play a crucial role in driving economic growth and job creation.”