N1.1 trillion reaches 700,000 Nigerian SMEs despite inflation and FX turmoil

Nigeria's impact investment market has delivered more than ₦1.1 trillion in financing to over 700,000 small and medium-sized enterprises (SMEs), a new study shows. The funding flowed despite persistent inflation, exchange rate volatility and high interest rates that have squeezed businesses across the country.

The figures come from the Nigerian Impact Investment Landscape Study 2025, presented at a virtual session titled “From Data to Action: Trends, Capital Flows, Emerging Opportunities and Strategic Insights from the Nigerian Impact Investment Landscape Study 2025.” The event brought together investors, development finance institutions and policymakers.

Investors shift to long-term, naira-denominated deals

Iffat Mahmud, Regional Representative for Africa at Innovision Global Consulting International, said the ecosystem is moving away from short-term, speculative financing toward long-term investments that generate measurable social, environmental and economic benefits. She described the ₦1.1 trillion milestone as “concrete evidence that Nigeria’s impact market is deepening and building genuine cross-sector coordination.”

Mahmud noted that investors are increasingly using Nigeria’s existing financial system to fund viable enterprises rather than waiting for better market conditions. The study, commissioned by the Impact Investors Foundation (IIF) under the Nigerian Impact Investing Research Industry Collaborative (NIIRIC), analysed more than 500 impact investment transactions completed between 2019 and 2025.

Over the review period, an estimated $2.7 billion was invested in sectors including financial inclusion, renewable energy, healthcare, agriculture and logistics. Researchers attributed the market’s resilience to wider adoption of local financing mechanisms such as green bonds, credit guarantees and wholesale debt facilities.

Local banks step up but ‘missing middle’ still struggles

Development Finance Institutions (DFIs) remain the largest source of impact capital. Local institutions like the Development Bank of Nigeria (DBN) and the Bank of Industry (BoI) have expanded wholesale lending programmes for micro, small and medium-sized businesses. Mahmud said Nigeria’s foreign exchange challenges have also accelerated the shift toward naira-denominated financing, reducing currency risks for businesses seeking long-term investment.

Despite the growth, the report identified a major financing gap for businesses in the “missing middle” — enterprises seeking funding between ₦20 million and ₦500 million (approximately $40,000 to $1 million). Many of these firms continue to struggle to secure suitable financing even as overall investor appetite rises.

Fintech dominates, agriculture and health lag behind

The sector-by-sector analysis revealed sharp disparities. Financial technology attracted the largest share of private equity and venture capital funding, receiving more than $2.9 billion between 2019 and 2025. Clean energy secured $305 million, agriculture got $189 million, and healthcare attracted $176 million. The uneven allocation underscores the challenge of channelling capital to sectors critical for Nigeria’s long-term economic development.

The report concluded that impact investing is becoming an increasingly important source of patient capital for Nigeria’s real economy, providing businesses with alternative financing options at a time when conventional borrowing remains expensive and difficult to access.

What this means for Nigerian businesses and the naira

The strong shift to naira-denominated funding is a positive signal for businesses worried about FX risk. More local-currency lending from DBN and BoI, combined with green bonds and credit guarantees, could ease pressure on SMEs that cannot access dollar financing. However, the persistent gap for mid-sized firms — those needing ₦20 million to ₦500 million — means many viable businesses will still struggle to grow unless new products target that segment directly.