IFC and Central Bank of Nigeria Partner to Enhance Local Currency Financing for Economic Growth

The partnership comes as Nigeria seeks to diversify its economy and improve the availability of financing for local enterprises.

The International Finance Corporation (IFC), a member of the World Bank Group, has entered into a significant partnership with the Central Bank of Nigeria (CBN) to bolster local currency financing, enabling private businesses in Nigeria to expand and thrive. This agreement will allow IFC to effectively manage currency risks while increasing its investment in the Nigerian naira, targeting key sectors crucial to the country’s economic development.

The partnership comes as Nigeria seeks to diversify its economy and improve the availability of financing for local enterprises. IFC has set a goal of providing over $1 billion in financing for priority sectors, including agriculture, housing, infrastructure, energy, small and medium enterprises (SMEs), and the creative and youth economy. These sectors have a pressing need for local currency funding, and collaboration with the CBN is seen as essential to expanding access.

Governor Yemi Cardoso of the Central Bank of Nigeria emphasized the importance of this initiative, stating, “This pioneering initiative between the IFC and CBN will unlock much-needed long-term local currency financing for private businesses in Nigeria at economically viable rates. This collaboration marks significant progress in the CBN’s commitment to delivering innovative development initiatives through reputable third-party service providers, moving beyond traditional intervention programs. It will serve as a catalyst for economic growth and advance the Federal Government’s agenda for economic diversification.”

IFC Managing Director Makhtar Diop reiterated the urgency of addressing the increasing demand for diverse funding options for Nigerian businesses. “Expanding access to affordable local currency financing for small businesses in Nigeria is essential for IFC to address the increasing demand for diverse funding options and to better manage currency risk,” he said. “Our partnership with the Central Bank of Nigeria will enhance lending in Nigerian naira, fostering economic growth and creating jobs across the country.”

Currently, IFC has an active investment portfolio in Nigeria totalling approximately $2.13 billion, making it the second-largest in Africa. The emphasis on local currency financing is a key priority for IFC as it aims to further strengthen its impact in the region. This initiative is part of a broader strategy to leverage innovative financial instruments and build strong partnerships to meet the growing demand for local currency financing in emerging markets.

Impact on SMEs: Small and medium enterprises form the backbone of Nigeria’s economy, accounting for around 48% of the country's GDP and employing a significant portion of the workforce. By providing increased access to local currency financing, IFC aims to support these businesses in overcoming challenges related to currency fluctuations and accessing capital.

Economic Diversification: Nigeria's economy has historically been dependent on oil exports. This partnership aligns with the Nigerian government’s strategic goal to diversify the economy by investing in other sectors, ultimately promoting sustainable economic growth.

Future Prospects: IFC plans to explore further financial innovations, including green bonds and blended finance solutions, to enhance its local currency financing capabilities and support Nigeria’s broader development agenda.