The World Bank is expected to approve a $500 million loan for Nigeria on Friday as part of efforts to expand access to finance for micro, small and medium enterprises across the country. The facility is designed to support small businesses, improve credit availability, and mobilise private sector funding to strengthen Nigeria’s real economy.
The proposed loan is under a programme titled the Fostering Inclusive Finance for MSMEs in Nigeria Project, also known as the FINCLUDE Project. Information obtained from the World Bank shows that negotiations on the loan are at an advanced stage, with approval by the World Bank Group’s board expected on December 19, 2025.
If approved, the World Bank will commit $500 million to the project, which has an estimated total cost of $2.39 billion. Of this amount, $400 million will be provided by the International Bank for Reconstruction and Development, while the remaining $100 million will come from the International Development Association. The balance of $1.89 billion required for the project is expected to be mobilised from commercial lenders as unguaranteed private financing.
Under the arrangement, the Federal Government of Nigeria will be the borrower, while the Development Bank of Nigeria will serve as the implementing agency with overall responsibility for managing and deploying the funds. The World Bank said the structure is designed to reduce risk, attract private capital, and ensure that funds reach small businesses that are often excluded from traditional bank lending.
According to the World Bank, the FINCLUDE project will leverage the existing platforms of the Development Bank of Nigeria and its subsidiary, Impact Credit Guarantee Limited, to deepen access to credit for MSMEs. The bank said these institutions would play a catalytic role in expanding inclusive finance across key sectors of the economy.
A World Bank document on the project stated that the FINCLUDE intervention would deploy a mix of inclusive and innovative financial instruments tailored to the diverse needs of MSMEs in Nigeria. The bank described the Development Bank of Nigeria as a trusted partner with strong implementation capacity and a proven track record in executing complex and innovative development finance projects.
The project is structured around three major components. The first focuses on providing inclusive and innovative finance products for MSMEs. This includes the provision of Tier 2 subordinated capital to eligible financial institutions and support for the establishment of an MSME investment fund. The investment fund is expected to deliver equity and long-term debt financing to small businesses that require patient capital to grow and scale.
According to the World Bank, this approach will help attract private investors, test new financial products, and promote long-term sustainability in the MSME financing segment. By strengthening the capital base of participating financial institutions, the project aims to increase lending capacity and reduce the cost of borrowing for small businesses.
The second component of the project centres on de-risking and mobilising private capital through partial credit guarantees. These guarantees will be provided through Impact Credit Guarantee Limited and are expected to encourage banks and other lenders to extend credit to MSMEs by sharing part of the lending risk. The World Bank said this mechanism is critical in an environment where high interest rates and perceived risks have limited bank lending to smaller enterprises.
The third component focuses on technical assistance to modernise and digitise Nigeria’s MSME finance ecosystem. This will include capacity building for financial institutions, improvements in regulatory oversight, and upgrades to digital systems linking the Development Bank of Nigeria, participating lenders, and MSME borrowers. The goal is to improve efficiency, transparency, and data-driven decision-making across the MSME finance value chain.
In its appraisal report, the World Bank noted that Nigeria is currently undergoing a critical economic transition driven by ongoing reforms. It highlighted the removal of fuel subsidies, the unification of foreign exchange rates, and broader fiscal adjustments as steps that have begun to stabilise the economy and restore investor confidence.
According to the report, these reforms have improved fiscal space, enhanced foreign exchange liquidity, and eased inflation to about 18 per cent as of September 2025. The World Bank added that growth prospects are improving, with the International Monetary Fund projecting Nigeria’s real GDP growth at 3.9 per cent in 2025.
Despite these improvements, the World Bank warned that access to finance remains uneven, especially for MSMEs, women-owned businesses, and the agriculture sector. It noted that agriculture accounted for just over five per cent of total bank credit in 2024, while high interest rates and shallow credit penetration continue to constrain lending to small enterprises.
If approved, the FINCLUDE project will add to Nigeria’s growing portfolio of World Bank-supported programmes. As of June 30, 2025, Nigeria’s external debt stood at $46.98 billion, according to the Debt Management Office. The World Bank Group remains Nigeria’s largest single creditor, accounting for $19.39 billion, or about 41.3 per cent of the country’s external debt stock.
Data also show that World Bank loans to Nigeria between 2023 and 2025 are projected to reach $9.65 billion by the end of 2025, excluding grants. When grants are included, total World Bank support is estimated at about $9.77 billion within the three-year period. Nigeria’s stock of International Development Association loans has risen to $18.5 billion, making it the largest IDA borrower in Africa and the third-largest globally.
Reacting to the rising World Bank commitments to Nigeria, Lagos-based economist Mr Adewale Abimbola said loans from multilateral institutions are typically concessionary, with lower interest rates and longer repayment periods. He noted that the key issue is not borrowing itself but how effectively the funds are utilised.
According to him, concessionary loans tied to viable projects with medium-term revenue prospects can support growth if properly managed. He stressed that the success of such interventions depends on strong implementation, accountability, and the ability of funded projects to strengthen revenue generation and economic resilience over time.
