Nigeria Announces Credit Guarantee Company Amidst Concerns of Debt-Driven Growth

Nigerian President, Photo: Africanews

January 2, 2025 Hour: 7:43 pm

President Bola Tinubu announced on Wednesday the establishment of a National Credit Guarantee Company, slated to begin operations in May 2025. While the administration touts the move as a step toward economic growth and financial inclusion, critics are raising concerns that this initiative could exacerbate existing inequalities and lead to unsustainable debt burdens for vulnerable populations.

According to Tinubu, the company aims to boost access to credit for businesses and individuals by providing risk-sharing mechanisms for financial institutions. “This initiative will strengthen the confidence of the financial system, expand credit access, and support underserved groups such as women and youth,” Tinubu stated.

However, experts warn that increased credit availability without addressing the underlying issues of poverty, job security, and economic inequality can lead to further exploitation of marginalized communities.

The company is set to collaborate with several government entities, including the Bank of Industry and the newly formed Nigerian Consumer Credit Corporation, along with private sector and multilateral organizations.

Le gouvernement fédéral nigérian se prépare à mettre en œuvre des interventions dans 9 palais et routes environnantes dans le cadre du projet de loi de crédits 2025, notamment en améliorant les infrastructures l'éclairage solaire et en relevant les défis environnementaux#Nigeria pic.twitter.com/Jozt9nIcNz
— Parallel Congress (@ParallelCo_) December 29, 2024

Eight months prior, Tinubu’s administration launched the Consumer Credit Corporation, initially targeting federal civil servants but now expanding to the general public. While these measures seem intended to expand financial inclusion, they may, in practice, deepen dependence on credit.

The administration’s emphasis on credit access as a driver of economic development raises concerns among left-leaning economists and activists who argue that this approach might prioritize debt-fueled consumption over sustainable, equitable growth. They highlight that without a corresponding push for job creation, fair wages, and accessible education and healthcare, increased access to credit can easily trap individuals and families in cycles of debt, benefiting financial institutions at the expense of vulnerable communities.

Moreover, the involvement of private sector and multilateral organizations raises questions about the potential for exploitation and unequal power dynamics. The government’s focus on market-based solutions risks further entrenching the existing capitalist framework that has led to significant inequalities in Nigeria.

While re-industrialization and improved living standards are stated goals of the plan, critics argue that these will not be achieved solely through increased lending. Sustainable development requires addressing the structural issues of inequality, such as unequal land distribution, corruption, and lack of access to essential services, which have historically disadvantaged marginalized groups.

Without systemic reforms, simply increasing the availability of credit risks creating a debt-fueled economy that ultimately benefits only the already wealthy.

The new National Credit Guarantee Company should be closely scrutinized to ensure it genuinely serves the needs of all Nigerians, not just the privileged few. Instead of relying on debt, the Nigerian government should focus on policies that create opportunities for people to earn a living wage and achieve financial security, without being burdened by predatory lending practices.

This initiative will be a crucial test of the government’s commitment to true economic justice. It is imperative that the focus remain on building a more equal and sustainable future for all Nigerians, rather than reinforcing structures that perpetuate poverty and inequality.