The World Bank is expected to approve a $500 million loan to Nigeria on Friday (today) as part of its efforts to expand financing access to micro, small and medium-sized enterprises across the country.
According to information received from the World Bank, the proposed facility is titled “Nigeria Inclusive Financial Development for MSMEs (FINCLUDE) Project” and aims to mobilize private capital and promote innovative financial products for small and medium enterprises.
Negotiations on the loan are currently underway and are expected to be approved by the World Bank Group’s Board of Directors on Friday. Approval is expected on December 19, 2025, and will see the World Bank commit $500 million to the project, out of an estimated total cost of $2.39 billion.
Of the World Bank loan, $400 million will come from the International Bank for Reconstruction and Development and $100 million from the International Development Association.
Under this arrangement, the Federal Government will be the borrower and the Development Bank of Nigeria will be the implementing agency with overall responsibility for managing the funds. The remaining $1.89 billion needed for the project will be provided as unsecured loans from commercial lenders.
According to the World Bank, the FINCLUDE project leverages the platform of the Development Bank of Nigeria and its subsidiary Impact Credit Warranty Limited to deepen credit access for MSMEs.
“The proposed FINCLUDE project leverages the platform of the Development Bank of Nigeria and its subsidiary Impact Credit Guarantee Limited to advance inclusive MSME financing,” the World Bank document said. “Through these catalytic institutions, the project will deploy a package of complementary, comprehensive and innovative instruments tailored to the diverse needs of MSMEs in Nigeria.”
The World Bank described DBN as “a well-known partner to the World Bank with strong implementation capabilities and a proven track record in designing and implementing complex and innovative projects,” noting that its role will be central to the success of interventions.
The project is structured around three main components. These include the provision of comprehensive and innovative MSME financial products, risk mitigation and private capital mobilization through partial credit guarantees, and technical assistance aimed at modernizing and digitalizing Nigeria’s MSME financial ecosystem.
Under the first component, the World Bank said the project will provide Tier 2 subordinated capital to eligible financial institutions and support the establishment of an MSME Investment Fund to provide equity and long-term debt financing to small and medium-sized enterprises. The bank said this approach will help “focus private capital, test market innovations and promote financial sustainability” within the MSME sector.
The project will also provide targeted technical assistance to strengthen the capacity of financial institutions, improve regulatory oversight, and modernize the MSME financial value chain that connects DBNs, lenders, and entrepreneurs.
In its assessment report, the World Bank highlighted Nigeria’s ongoing economic reforms and said the country is “in a period of critical transition.” The report noted that the abolition of fuel and foreign currency subsidies, along with the unification of exchange rates, has stabilized the economy and begun to restore investor confidence.
“These reforms have improved fiscal space, increased foreign exchange liquidity and eased inflation to 18% as of September 2025,” the report said, adding that growth prospects are strengthening, with the International Monetary Fund forecasting real GDP growth of 3.9% in 2025.
Despite these improvements, the World Bank warned that access to finance remains uneven, particularly for MSMEs, women, and the agricultural sector. The report pointed out that agriculture-related loans will account for just over 5% of total bank credit in 2024, while high interest rates and low credit penetration continue to constrain lending to small and medium-sized enterprises.
If approved on Friday, the FINCLUDE project will join Nigeria’s growing portfolio of World Bank-supported programs. According to the Debt Management Bureau, as of June 30, 2025, Nigeria’s external debt was $46.98 billion.
The World Bank Group remains Nigeria’s largest single creditor, accounting for $19.39 billion of the total, including $18.04 billion from IDA and $1.35 billion from IBRD. This represents 41.3 per cent of Nigeria’s external debt, underscoring the bank’s key role in financing Nigeria’s development initiatives.
PUNCH earlier reported that World Bank lending to Nigeria from 2023 to 2025 is expected to reach $9.65 billion by the end of this year, with new approvals, ongoing negotiations and implementation accelerating in key areas.
That amount covers only loans to the International Bank for Reconstruction and Development and the International Development Association, according to an analysis of data on the bank’s website by The Punch. With the addition of grants, total World Bank support increases to approximately $9.77 billion over three years.
The International Bank for Reconstruction and Development provides financing on commercial or near-commercial terms to middle-income and high-credit-quality low-income countries, and the International Development Association provides highly favorable loans and grants to the world’s poorest countries.
Punch also reported that Nigeria’s World Bank International Development Association loan balance has increased to $18.5 billion, making it the largest IDA borrower in Africa and the third largest in the world.
The latest data from IDA’s unaudited financial statements for the third quarter of 2025 confirms that the country has moved up to third place, overtaking India in 2024, retaining the position it achieved for the first time. The country will become the fourth largest borrower in 2023.
According to the report, Nigeria’s exposure will increase from $17.1 billion in September 2024 to $18.5 billion in September 2025, representing an increase of $1.4 billion or 8.2%. The increase reflects the country’s heavy reliance on concessional financing to fill infrastructure gaps, stabilize reform programs and support social spending amid volatile oil revenues.
Economists warn that while the increase in the lending pipeline is potentially beneficial for long-term development, it could deepen fiscal pressures if it is not matched with stronger domestic revenue mobilization and prudent spending management.
Reacting to the World Bank’s increased commitment to Nigeria, Lagos-based economist Adewale Abimbola said loans from multilateral institutions such as the World Bank are largely concessional, with interest rates generally below market levels and repayment periods long.
He noted that the key question was not whether Nigeria should borrow, but whether the loans would be structured and deployed effectively. “I don’t think it’s a bad idea if it’s concessional and tied to a viable project with medium-term income potential,” Abimbola explained. “There’s nothing wrong with borrowing. The important thing is to take advantage of it.”
He stressed that the economic impact of these loans will depend on how well they are channeled into projects that can generate long-term sustainable growth, strengthen revenue and improve public services.
