Chairman of UBA Group Tony Elumelu has explained why entrepreneurs face strict conditions when seeking loans from commercial banks, attributing the challenge to regulatory requirements.
Mr Elumelu spoke during a panel session at the 49th Governing Council meeting of the International Fund for Agricultural Development (IFAD) in Rome, Italy.
He said commercial banks are limited in the level of risk they can assume, especially in financing small and medium-sized enterprises (SMEs).
“The issue of finance, I wear a commercial bank hat. There’s a limit to what they can do in providing the kind of risk capital that SMEs or entrepreneurs need,” he said.
According to him, banks must comply with regulations that require collateral and verifiable repayment sources.
“If you don’t do that, there’s a charge on the bank’s capital, but people don’t understand this. So oftentimes they blame financial institutions, but the regulatory environment is tightening; it will not allow banks to provide the kind of money,” Elumelu added.
He said this constraint led to the establishment of the Tony Elumelu Foundation, which provides $5,000 non-refundable seed capital to entrepreneurs.
Elumelu also noted that development finance institutions (DFIs), set up to bridge funding gaps, often have conditions that are difficult for young entrepreneurs to meet.
“You go to some development financial institution, they will ask for an arm and a leg. Then you start wondering, how would these young entrepreneurs provide this collateral?” he said.
He called on governments to create an enabling environment for small businesses.
“So I take to advocacy, I pray to government, create the enabling environment, support the young entrepreneurs. And indeed, in some ways, it’s working,” he said.
Elumelu urged African governments to collaborate with the private sector to drive rural transformation and food production.
“We believe that increased collaboration and cooperation between government and the private sector especially in Africa are vital to catalyse more transformation in rural economies and agriculture, increasing food production,” he said.
“Food security is fundamental to societal development. We must work together to make rural economies more attractive. We need to make agriculture appealing and exciting. The youth seem eager to embrace it, but they require more support from all of us.”
He identified electricity access, blended finance and business education as key to supporting agriculture and rural enterprises.
“Access to electricity is essential for economic development and transformation. We cannot discuss AI without improving electricity supplies,” he said.
“Poor electricity access and energy poverty limit how much these young people can embrace technology.”
Tony Elumelu also called for reforms to ease regulatory constraints and collateral requirements affecting SMEs.
“In some countries, regulated environments can be quite stifling. We need to engage governments… what benefits small-scale enterprises benefits the entire economy: jobs are created by SMEs, and we must ensure youth engagement,” he said.
He advocated blended finance models that combine philanthropic and commercial funding to support entrepreneurs outside traditional banking structures.
His comments come amid evolving credit conditions in Nigeria.
In its Q4 2025 Credit Conditions Survey, the Central Bank of Nigeria reported improved credit availability across major lending segments, despite rising loan defaults among households and businesses.
Interest rates on commercial loans range between 29 percent and 36 percent, according to industry data.
CBN data from early 2025 showed that 75 percent of businesses identified high interest rates as a major operational challenge.
