Chairman of UBA Group, Tony Elumelu, has highlighted the challenges faced by entrepreneurs in accessing loans from commercial banks, attributing the issue to increasingly stringent regulatory requirements. Elumelu made these remarks during a panel session at the 49th Governing Council meeting of the International Fund for Agricultural Development (IFAD) in Rome.

Elumelu explained that while banks are generally willing to lend, they operate under strict compliance rules. He noted that accessing credit from commercial banks typically requires meeting rigorous conditions, including providing collateral and demonstrating a clear capacity for repayment before loan approvals and disbursements can occur.

He pointed out that commercial banks have limitations on the level of risk they can assume, especially when it comes to financing small and medium-sized enterprises (SMEs). Banks must adhere to regulatory standards that demand collateral and verifiable repayment sources; failure to do so has capital implications for the institution.

Elumelu cited this constraint as a key reason for establishing the Tony Elumelu Foundation, which provides $5,000 non-refundable seed capital to entrepreneurs, a type of funding that commercial banks cannot offer under the existing regulatory frameworks.

He also mentioned that many governments have established development finance institutions (DFIs) to address the financing gap. However, accessing funds from these institutions can still prove difficult for young entrepreneurs, as their requirements often remain beyond reach.

Elumelu's comments come at a time when credit conditions in Nigeria’s banking sector are evolving. Overall, households are facing higher borrowing costs, while corporate borrowers are experiencing varied pricing trends, reflecting both opportunities and constraints in the credit market.

Acknowledging the frustrations of young entrepreneurs, Elumelu urged governments to foster a more enabling environment for small businesses. He emphasized that beyond access to finance, broader policy reforms and supportive infrastructure are crucial for unlocking entrepreneurial growth.

High lending rates remain a significant impediment to business growth in Nigeria. Interest rates on commercial loans currently range between 29% and 36%, placing a substantial burden on businesses, particularly SMEs.

The situation highlights the delicate balance between maintaining financial stability through tight regulation and ensuring that small businesses, which are vital for economic growth and job creation, have adequate access to credit.