The Central Bank of Nigeria made a change in 2025. It reduced the amount of money it lends to the Federal Government. This move shows that the Central Bank of Nigeria is being more careful about giving money to the government.

The Central Bank of Nigeria had ₦26.74 trillion in debt securities from the Federal Government in 2024.. By the end of 2025 this amount decreased to ₦26.40 trillion. That is a decrease of about ₦348.6 billion. During the time the total assets of the Central Bank of Nigeria increased by 18.1 per cent to ₦138.66 trillion.

For people who own businesses the size of the Central Bank of Nigerias assets is not the main issue. What matters is whether the Central Bank of Nigeria lending money to the government will make it easier for small businesses to get loans from banks.

This will not happen away.. The new policy could create better conditions for lending if it helps to reduce inflation make the naira more stable and bring down interest rates.

What Did the Central Bank of Nigeria Actually Change?

The Central Bank of Nigerias audited accounts showed that it lent money to the Federal Government in 2025. The Central Bank of Nigeria said that part of the reason for this decrease was that the government did not need to borrow much money from the Central Bank of Nigeria when its revenue was low.

However the ₦26.40 trillion figure is not the amount of money that the government borrowed from the Central Bank of Nigeria. It includes all the money that the Central Bank of Nigeria has given to the government. The published accounts did not provide a figure for the amount of money that the government borrowed from the Central Bank of Nigeria.

This is important because the Central Bank of Nigeria cannot just take the ₦348.6 billion decrease and give it to banks to lend to small businesses.

The effect on Medium Enterprises is indirect. It happens through inflation, interest rates, the amount of money in the banking system and the lending choices that commercial banks make.

The Central Bank of Nigerias ₦138.66 trillion in assets is not a pool of money that’s available for Small and Medium Enterprises loans. It includes reserves, securities and other assets that the Central Bank of Nigeria uses to do its job.

How Could This Help Businesses?

When the government borrows a lot of money from the Central Bank of Nigeria more money can enter the economy without a similar increase in goods and services.

This can add to inflation. Make the naira weaker. For businesses that means higher prices for things like stock, fuel, transport, rent, electricity, raw materials and imported equipment.

If the Central Bank of Nigeria lends money to the government it can help control the amount of money in circulation. If inflation continues to fall and the exchange rate becomes more stable the Central Bank of Nigeria may eventually have room to reduce interest rates.

That could help businesses because commercial banks use the Central Bank of Nigerias policy rate as one of the factors when setting their lending rates.

A lower policy rate would not automatically make loans cheap. Banks would still add their operating costs, risk charges and profit margins.. It could reduce some of the pressure that keeps business loans expensive.

A stable naira would also help businesses that import goods, machinery or raw materials. They would be better able to plan their costs without worrying that a sudden exchange-rate change could wipe out their profit.

Why Are Business Loans Expensive?

Nigerias monetary policy is still tight.

At its July 2026 meeting the Central Bank of Nigeria kept the Monetary Policy Rate at 26.5 per cent. It also kept the Cash Reserve Requirement for banks at 45 per cent.

The policy rate influences borrowing costs across the economy. Banks usually lend above it after accounting for risk, expenses and profit.

The cash reserve requirement also means banks must keep a share of their deposits with the Central Bank of Nigeria instead of lending all of the money to customers.

This means Small and Medium Enterprises may continue to face loans even though the Central Bank of Nigeria has reduced its financing of the government.

Banks also have places to put their money. They can buy government securities. Lend to large companies with strong financial records and valuable assets.

A small business without accounts, collateral or a clear repayment history may still look too risky.

Why Do Small and Medium Enterprises Struggle to Get Bank Loans?

The problem goes beyond the Central Bank of Nigerias relationship with the government.

The World Bank has said that than one in 20 Nigerian Micro, Small and Medium Enterprises have access to bank credit. Many available loans come with interest rates, short repayment periods and collateral requirements that exclude smCBN restricts credit to public sector, banks’ staff with additional guidelinesall firms.

Some businesses also make it harder for banks to assess them.

A company may have customers and steady sales but still lack proper records showing its income, expenses, cash flow and profit. The owner may also mix business money with spending.

Without records the bank cannot easily determine whether the company can repay a loan.

It may reject the application offer money than the business needs or demand property as security.

Government borrowing creates another problem. When banks can earn returns by buying government securities they may see little reason to take the greater risk of lending to smaller companies.

Reducing Central Bank of Nigeria financing is therefore only part of the answer. The government must also control how much it borrows from banks and other investors in the local market.

What Would Help More Small and Medium Enterprises Get Credit?

Several changes would need to happen

Inflation must continue to fall before the Central Bank of Nigeria can comfortably reduce interest rates without creating pressure on prices or the naira.

Banks also need credit guarantees. Under arrangements another institution agrees to cover part of the loss if a business fails to repay. This makes banks more willing to lend to companies that do not own property.

The World Banks $500 million FINCLUDE programme is expected to support lending through the Development Bank of Nigeria and its credit-guarantee subsidiary. The programme aims to expand financing to 250,000 Micro, Medium Enterprises and provide up to $800 million in guarantees.

Banks could also rely more on cash flow, payment records and business transactions when assessing loan applications. This would reduce their dependence on land and buildings as collateral.

Small-business owners also have a role to play. They can improve their chances by keeping records operating a separate business account and maintaining a clear history of sales and payments.

What Should Business Owners Watch Next?

Small and Medium Enterprises owners should pay attention to the Central Bank of Nigerias interest-rate decisions rather than assume that the reduction in government financing has already made loans cheaper.

They should also watch lending rates new Development Bank of Nigeria programmes, credit-guarantee schemes and changes to collateral requirements.

The availability of repayment periods will also matter. A loan may have an interest rate but still be difficult to repay if the bank gives the business only a few months.

The fall in the Central Bank of Nigerias claims on the government is a sign of financial discipline. Over time it could support inflation, a more stable naira and a healthier lending market.

It will not solve the Small and Medium Enterprises credit problem on its own.

The real test is whether commercial banks begin lending money to productive businesses and whether those businesses can access credit at rates they can realistically repay

Frequently Asked Questions

Does the CBN’s ₦138.66 trillion belong to small businesses?

No. The figure represents the CBN’s total assets, including reserves, securities and other financial holdings. It is not an SME loan fund.

Will less government financing make business loans cheaper?

It may help over time if it reduces inflation and creates room for lower interest rates. However, loans are unlikely to become much cheaper while the policy rate remains high.

How can an SME improve its chances of getting a loan?

The business should keep clear records of sales, expenses and profit, operate a separate business bank account and prepare a simple plan explaining how the loan will be used and repaid.