Government Funding and Loans for Startups in Nigeria; Starting and growing a business in Nigeria can be challenging with limited access to funding. However, the Nigerian government, through various agencies and programs, provides loans, grants and other support to boost small businesses and startups. This guide provides an overview of major government funding options available to entrepreneurs and startups in Nigeria as of 2023.
Access to capital remains one of the biggest obstacles for Nigerian startups and small businesses. According to estimates, SMES account for 96% of businesses in Nigeria but only access about 5% of available credit. However, the Nigerian government recognizes the importance of small businesses to economic growth and job creation. This has led to creation of various funds, loans schemes and programs to support entrepreneurs.
While there are still difficulties in accessing government startup funding in Nigeria, the situation is improving with new initiatives aimed at increasing funding to the MSME sector. This guide explores some of the notable government funding programs, requirements and how startups can apply.
Central Bank of Nigeria MSME Fund
One of the largest government MSME funds is the ₦220 billion Central Bank of Nigeria MSME fund which was launched in 2013 to provide concessionary loans to small businesses. The loans are accessed through participating banks, microfinance banks and other approved financial institutions.
Startups can get loan amounts ranging from ₦500,000 to ₦10 million with a 5 year tenure and 9% interest rate per annum. Collateral is required depending on the loan amount. Applications are submitted to participating banks and applicants should have a business plan, cash flow projections and other documents.
Bank of Industry Youth Entrepreneurship Support (YES) Program
The Bank of Industry (BOI) YES program specifically targets youth-owned enterprises (18 to 35 years) and provides access to loans ranging from ₦500,000 to ₦10 million at 5% interest rate per annum.
To qualify, startups must submit business plans, 18 months cash flow projections, evidence of venue/business site and have 50% of required equity contribution for the project. The BOI YES loan has a flexible repayment plan within 3 to 5 years.
State Government MSME Loans and Grants
Several Nigerian states now operate special loans and grants initiatives targeting MSMEs and technology startups located within their states. For instance:
– Lagos State Employment Trust Fund – Provides loans of ₦500,000 to ₦20 million with 6 months moratorium, 5% interest rate and 1-5 year tenure.
– Ogun State Government MSME Grant – Offers grants of ₦100,000 for existing enterprises and ₦200,000 for new startups registered in Ogun State.
– Kaduna State MSME Loan – Offers startups and MSMEs loan amounts from ₦100,000 to ₦10 million with 10% interest rate per annum.
Startups should check MSME funding opportunities within their state government and apply directly or through designated banks/agencies.
Agribusiness Funding – CBN & NIRSAL Loans
For agribusinesses and agro-allied startups, funding is available through the Central Bank of Nigeria (CBN) and Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL).
Key programs include CBN’s Anchor Borrowers Program, Commercial Agriculture Credit Scheme and NIRSAL’s Credit Risk Guarantee scheme which encourages banks to lend to agribusinesses by sharing risks. Loan amounts range from hundreds of thousands to tens of millions of Naira with varying interest rates and terms.
MSME Grants – YouWin, DEMO Africa, TEF Entrepreneurship Program
Beyond loans, Nigerian startups can also access grants from government and private sector-backed programs including:
– YouWin – Provides grants of ₦1 million to ₦10 million for growth-oriented businesses. Funded by the Federal Government.
– DEMO Africa – Startups can win equity-free grants up to $25,000 by pitching at DEMO Africa events. Funded by LIONS@FRICA partnership.
– Tony Elumelu Foundation (TEF) – Selected entrepreneurs receive $5000 seed capital through the TEF annual entrepreneurship program.
Startups interested in grants should watch out for application windows for these major programs.
Funding Tips and Resources for Nigerian Startups
– Follow reputable banks and microfinance institutions for CBN MSME fund opportunities
– Work on required documents – business plans, projections, registration etc.
– Explore loans or grants available in your state.
– Leverage business incubation hubs and accelerators for funding support and access.
– Attend startup events and pitch competitions to showcase your business.
– Visit SMEDAN MSME portal and BOI website for regular updates on government MSME funding.
– Network with other startups who have successfully accessed government loans or grants.
Accessing loans and grants from the Nigerian government can provide the valuable injection of capital for startups to scale their business. While there are still access gaps, new initiatives are emerging aimed at supporting the startup ecosystem. Do your research, prepare documentation, meet eligibility criteria and explore the funding options available.