National Credit Guarantee Company: Potential Game Changer For MSMEs
By Oyewole Sarumi
In a significant policy move, President Bola Ahmed Tinubu has officially launched the National Credit Guarantee Company Limited (NCGC), with a starting capital of N100 billion. Backed by respected institutions like the Ministry of Finance Incorporated (MOFI), Nigeria Sovereign Investment Authority (NSIA), Bank of Industry (BOI), and the Nigeria Consumer Credit Corporation (CrediCorp)—with technical support from the World Bank Group—the establishment of the NCGC signals a new and commendable step toward improving access to finance for Nigerian businesses.
Coming at a time when Nigeria’s Micro, Small, and Medium Enterprises (MSMEs) are grappling with unprecedented access-to-credit challenges, this initiative, if thoughtfully implemented, could be the catalyst needed to unlock sustainable growth, industrialization, and widespread job creation.
However, while the policy intention is laudable, there are critical design and execution issues that demand careful reflection. Chief among them is ensuring that the NCGC stays laser-focused on its most urgent mandate: serving MSMEs effectively and consistently—not diluting its purpose by overextending into vague territories such as “small corporates” and “large businesses.”
Nigeria’s economic history is replete with good initiatives that lost their way due to poor focus and execution. If the NCGC is to truly transform the landscape for MSMEs, it must learn from these past missteps.
This article offers a comprehensive analysis, commendation, and constructive critique of the NCGC initiative, drawing lessons from past experiences and highlighting how this bold move can become a watershed moment for Nigeria’s MSME sector—if we get it right.
Commendation: A Strategic Move to De-Risk Lending
First and foremost, the Tinubu administration deserves commendation for recognizing the structural weakness in Nigeria’s credit system and moving to address it.
Across the world, well-functioning credit guarantee schemes have proven effective in de-risking lending to small businesses, particularly in economies where financial institutions are risk-averse and SMEs struggle with collateral requirements.
Countries like South Korea, Malaysia, and even Ghana have long used credit guarantee agencies to catalyse SME growth. South Korea’s Korea Credit Guarantee Fund (KODIT) and Malaysia’s Credit Guarantee Corporation (CGC) are textbook examples of how to integrate such structures into national economic policy with long-term success.
Nigeria’s credit market remains notoriously shallow. Despite contributing about 48% of GDP, MSMEs account for less than 5% of total credit extended by deposit money banks. Most Nigerian MSMEs are either denied loans outright or subjected to prohibitively high-interest rates, often exceeding 25% per annum. Collateral demands are unrealistic, with property, land, or other fixed assets often out of reach for most micro and small enterprises.
Thus, the ₦100 billion initial capital of the NCGC—if effectively leveraged—can be transformative. Properly structured, the NCGC can provide the much-needed credit guarantees that will enable banks and financial institutions to lend more confidently to MSMEs, unlocking fresh capital flows into a sector that is the lifeblood of the Nigerian economy.
Critical Observations: Where the NCGC Must Be Vigilant
However, enthusiasm must be tempered with vigilance. Past experiences with institutions intended to serve MSMEs—Bank of Industry (BOI) included—highlight the dangers of mission drift and poor focus.
The MSME Focus Must Be Crystal Clear
The government’s announcement that NCGC will serve “MSMEs, small corporates, manufacturers, consumers, and large businesses” raises immediate concerns.
This breadth is too wide and vague.
MSMEs need a dedicated credit guarantee platform tailored to their realities—not one where their interests are submerged under broader, ill-defined classifications. The reality is that when an institution serves “everyone,” MSMEs invariably find themselves pushed to the bottom of the queue.
We have seen this movie before: Microfinance Banks (MFBs), originally intended to serve micro and small businesses, gradually drifted toward serving larger SMEs and corporates. Over time, loan ticket sizes increased, conditions became stringent, and interest rates skyrocketed. The very constituency that MFBs were created to serve was locked out.
If care is not taken, the NCGC could suffer the same fate. The term “small corporates” is nebulous. In Nigeria’s business context, “small corporates” can include companies with turnover levels and balance sheets that far exceed those of typical MSMEs. Left unchecked, credit guarantees could become skewed toward these larger entities—especially since larger clients are less risky and more profitable for financial institutions.
Recommendation:
The NCGC must have a dedicated MSME window—with clear definitions aligned with the SMEDAN/CBN classifications. For clarity:
Micro enterprises: less than 10 employees, turnover under ₦10 million/year
Small enterprises: 10–49 employees, turnover ₦10 million to ₦100 million/year
Medium enterprises: 50–199 employees, turnover ₦100 million to ₦500 million/year
Focus must be on these boundaries, not broader categories that will allow scope creep.
Interest Rates Must Be Accessible, Not Cutthroat
One of the biggest burdens MSMEs face today is prohibitive interest rates.
Despite BOI’s noble mandate, MSMEs often complain that BOI’s loan conditions remain unrealistic for truly small businesses—rigid collateral demands, bureaucratic application processes, and in some cases, effective interest rates approaching commercial bank levels.
If the NCGC is to succeed, it must ensure that guaranteed loans are offered at affordable interest rates.
Credit guarantee schemes in other countries achieve this by subsidizing risk for lenders. In South Korea, for example, KODIT helps banks offer single-digit interest rates to SMEs, because the risk burden is shared.
If Nigerian MSMEs continue to face 20–30% lending rates even under a guaranteed scheme, the NCGC will have failed its primary mission.
Recommendation:
The NCGC should set maximum interest rate ceilings on loans covered under its guarantees—ensuring that the risk-sharing results in lower-cost financing for MSMEs.
Transparent, Efficient Operations are Non-Negotiable
Bureaucracy has long been the graveyard of good intentions in Nigeria.
The NCGC must be designed with lean, transparent, and digitally enabled operations. Guarantee approvals should be fast, data-driven, and fair.
The success of the SME Credit Guarantee Scheme (SCGS) in Singapore, for example, stems from its efficient digital interface—allowing SMEs to get approvals within days, not months.
Recommendation:
Leverage digital technology for loan applications, credit evaluations, guarantee issuances, and monitoring. Prioritize transparency and real-time tracking to prevent bottlenecks and corruption.
The Broader Economic Impact: Why Getting It Right Matters
If properly executed, the NCGC could deliver enormous positive spillovers for Nigeria’s economy.
Stimulating MSME Growth and Employment
MSMEs employ over 84% of Nigeria’s labour force. Yet their growth is perpetually stunted by lack of access to affordable finance.
Expanded credit access will allow MSMEs to scale operations, hire more workers, invest in productivity improvements, and formalize and join the tax net
A credit-powered MSME boom would generate much-needed jobs, incomes, and GDP growth at a time when Nigeria faces high youth unemployment and sluggish economic expansion.
Boosting Financial Inclusion
The World Bank’s 2024 report notes that Nigeria’s financial inclusion rate remains below 60%—and MSMEs, particularly those owned by women and youth, are the most excluded.
By de-risking lending to these groups, the NCGC can help broaden access to finance, thereby driving inclusive economic growth—a core promise of the Tinubu administration’s economic agenda.
Promoting Industrialization and Domestic Value Addition
Nigeria’s industrial base has withered over decades. MSMEs can play a vital role in re-industrialization, particularly in sectors like agro-processing, light manufacturing, and textiles—if they have access to capital.
A functioning NCGC could be the missing link between small-scale entrepreneurship and industrial-scale productivity.
Conclusion:
The establishment of the National Credit Guarantee Company Limited (NCGC) is a visionary step by the Tinubu administration—a step that deserves recognition and support. Yet, good policy design is only half the journey. Yes, this project is a bold step, but execution is everything
The true success of the NCGC will be measured not by how impressive its board members are, or how large its starting capital is—but by whether it delivers tangible, affordable credit access to MSMEs.
Nigeria cannot afford another institution that starts with lofty goals and ends up serving only the privileged few. The stories of microfinance banks drifting away from their original MSME mandate should serve as a clear warning. We have not forgotten People’s bank that did not serve the people but the privileged few. Also, we remember the Community banks of old that were sited in communities but did not help the community.
If the NCGC stays focused on MSMEs, ensures affordable interest rates, operates with efficiency and transparency, and is shielded from elite capture, it could indeed become the gamechanger the Nigerian economy has been waiting for.
The stakes are high. The opportunity is immense. The time to get it right is now.
