Who Will Finance Nigeria’s Human Capital? The Case for MSMEs in the Education Sector

Education is the foundation on which every other sector depends. It determines whether young people can become skilled workers, entrepreneurs, technicians, teachers, health professionals or digital talent. Yet Nigeria’s education sector remains commercially underdeveloped and financially underserved. Education's importance to national development is not reflected in the level of capital flowing into the sector. The deeper concern is that both its contribution to GDP and its share of private sector credit remain small for a country whose development prospects depend heavily on human capital.

Public financing provides part of the explanation. Government expenditure on education stood at 0.3% of GDP in 2023 (World Bank, 2026), while education received a relatively modest share of public expenditure, below the international benchmark of 15–20% of public expenditure (UNESCO, 2025). These constraints reinforce the need to mobilise complementary private capital without diminishing the State’s responsibility for accessible, quality education.

The dataset makes this visible. Education’s contribution to GDP fell from 2.07% in 2014 to 0.69% in 2025, while the sector’s share of private sector bank credit declined from 0.67% to 0.15% over the same period (CBN, 2025). This is not a simple proportionality problem. It is a human capital warning sign: a sector central to productivity, employability, and social mobility remains weakly represented in both output and formal finance.

Fig. 1: Education: Economic Footprint and Credit Allocation

The sector recorded GDP contribution and credit allocation are both small, reinforcing the need to treat education finance as a development priority.

Data Source: CBN Statistical Bulletin

The public sector cannot carry Nigeria’s education burden alone. UBEC’s 2022 basic education data show 171,027 basic education schools, with 91,252 private schools and 79,775 public schools. Private basic schools also accounted for 13,694,354 learners out of total enrolment of 47,010,008. This means private providers are not a side story; they are already a major part of how Nigerian children access learning.

Behind these schools is an enterprise layer that is often overlooked: nursery and primary schools, secondary colleges, vocational institutes, tutorial centres, publishers, bookshops, uniform makers, laboratory suppliers, and education-technology platforms. These are not just social institutions. They are MSMEs carrying payrolls, renting or building facilities, buying equipment, adopting technology and responding to demand that public provision cannot fully meet.

Bank credit to education has not shown the kind of momentum required for a sector expected to strengthen skills, productivity, and enterprise formation. In nominal terms, bank credit to education stood at N86.00 billion in 2014 and N84.13 billion in 2025. Over the same period, its share of total private sector credit fell from 0.67% to 0.15%. The point is that investable education enterprises remain far from the centre of the formal credit system.

Fig. 2: Bank Credit to Education Sector

Bank credit to education has remained modest in absolute terms and declined sharply as a share of private sector credit.

Data Source: CBN Statistical Bulletin

This financing weakness matters because education enterprises are capital intensive in ways conventional lenders often underestimate. Schools need classrooms, laboratories, libraries, buses, hostels, technology, furniture, safety upgrades and working capital that matches the academic calendar. Vocational centres need equipment before they can train. EdTech firms need product development, content, distribution, and user acquisition before they scale. Short-tenured, expensive credit cannot properly serve these needs.

The financing gap also reflects several market constraints. Education investments often have long payback periods, while tuition and fee income is seasonal and concentrated around academic terms. Many smaller providers operate from leased premises or hold assets that lenders do not readily accept as collateral, and informality, weak bookkeeping, and limited financial records make credit assessment more difficult. These factors raise perceived risk and discourage financial institutions from providing the longer-term capital the sector requires.

Education is broader than formal schooling. DBN’s opportunity spans the full enterprise value chain: basic and secondary schools expanding access; vocational and technical institutes building employable skills; tutorial and examination preparation centres responding to intense transition demand; publishers and suppliers keeping schools functional; and digital learning platforms widening access at lower cost. Each segment has a different cash flow profile, but the same basic constraint: access to suitable finance determines whether the enterprise can expand quality, reach, and resilience.

This is where MSMEs in this sector becomes strategically important. Better-financed education enterprises do more than increase enrolment. They create teaching and non-teaching jobs, support local supply chains, strengthen skills formation and improve the productive capacity of the wider economy. In that sense, education finance is not only social spending. Properly structured, it is long-term economic infrastructure.

DBN’s education portfolio shows that the sector is financeable when capital is structured with patient, development-oriented intent. Annual disbursement to the sector rose from N35.5 million in 2022 to N3.47 billion in 2024, before reaching N9.41 billion in 2025. This was not a symbolic movement at the margins. It reflected a shift towards financing schools, colleges, training institutes and education service providers with clearer development relevance.

DBN’s value in this ecosystem extends beyond the volume of its disbursements. Through participating financial institutions, the Bank can support longer tenors for capital-intensive investments, repayment structures aligned with academic calendars and fee cycles, and risk-sharing mechanisms that encourage more lending to viable education enterprises. Capacity building for participating financial institutions and education MSMEs through BizAid (DBN’s learning platform) can also improve credit appraisal, financial management, governance, and investment readiness. By using its capital and risk instruments to mobilise participating financial institutions’ balance sheets, DBN can help expand education finance beyond the limits of its own funding.

Fig. 3: DBN Loan Disbursement to the Education Sector

DBN disbursement to education MSMEs rose sharply between 2022 and 2025.

Data Source: DBN

The reach of that financing is just as important as the volume. DBN financed 40 MSMEs in 2022, expanded to 972 in 2024, and cumulatively supported 1,705 education enterprises between 2022 and 2025. In 2025 alone, the sector accounted for 10,981 jobs created/sustained through our PFIs. Those numbers matter because each financed education enterprise represents more than a borrower. It can mean additional classrooms, retained teachers, practical training capacity, local jobs, and a more durable pipeline of skills.

The education financing question is no longer whether education is important. The real question is whether Nigeria can build and finance the enterprises that make learning accessible, affordable, and relevant at scale. Government must increase and improve public investment in education while strengthening regulations, quality assurance, and the operating environment for credible private providers.

Financial institutions should develop specialised education finance products, align repayment structures with academic calendars, and use cash-flow-based lending approaches where conventional collateral is limited. Development finance institutions should provide longer-term capital, technical assistance, risk-sharing instruments, and blended-finance structures that make viable education enterprises easier to finance. Impact investors should also treat education as a productive investment class capable of generating measurable social and economic returns, rather than viewing it solely as a social expenditure category.

In conclusion, roads move goods. Power supports production. Education builds human capital. Financing MSMEs in the education sector should therefore be viewed not merely as credit allocation, but as an investment in the productive infrastructure that shapes jobs, long-term growth, competitiveness, and economic inclusion.

CBN (2025). Quarterly Statistical bulletin, Q4 2025. Central Bank of Nigeria, Abuja

DBN (n.d.). MSME data insight dashboard. Development Bank of Nigeria

National Bureau of Statistics. (2026). Nigerian Gross Domestic Product report: Fourth quarter and full year 2025. https://microdata.nigerianstat.gov.ng/index.php/catalog/147

UNESCO. (2026). Education financing: What you need to know. United Nations Educational, Scientific and Cultural Organization

UBEC (n.d.). Basic education statistics from 2022 NPA. Universal Basic Education Commission. https://ubec.gov.ng/

World Bank. (2026). Government expenditure on education, total (% of GDP)—Nigeria Data set. https://data.worldbank.org/indicator/SE.XPD.TOTL.GD.ZS?locations=NG