ESG and Green Finance: BOI Report Exposes Barriers Facing Nigerian MSMEs

The Bank of Industry (BOI) has revealed that limited access to finance and inadequate technical expertise remain the major obstacles preventing Micro, Small, and Medium Enterprises (MSMEs) in Nigeria from adopting Environmental, Social, and Governance (ESG) practices.

This was highlighted in a new report titled “Environmental, Social and Governance Adoption by Nigerian Micro, Small and Medium Enterprises”, launched during the bank’s first ESG conference in Lagos. The report, themed “Advancing ESG Adoption,” sheds light on how local enterprises can integrate sustainability principles into their business operations.

According to the BOI, while ESG practices are becoming a global priority, Nigerian MSMEs still struggle to align with these standards due to poor access to funding, lack of policy incentives, low awareness, and minimal customer demand.

A nationwide survey that informed the report captured over 300 responses from MSMEs across Nigeria’s six geopolitical zones, covering sectors such as agriculture, ICT, manufacturing, hospitality, healthcare, engineering, and finance. Findings from the study showed that 78% of respondents identified financial constraints as a major setback, while 65% pointed to a shortage of technical knowledge as a major barrier to ESG compliance.

Other concerns raised include inadequate government incentives (65%), poor customer demand (20%), and limited knowledge of ESG practices (45%). The report concluded that market forces alone are not enough to drive adoption, calling for structured support in financing, training, and policy reforms.

The BOI report also proposed several solutions to strengthen ESG integration in Nigerian businesses. These include the introduction of ESG-compliant loan products, targeted training for entrepreneurs, gender-focused credit windows, and blended financing models to expand access to capital. The bank also recommended regional capacity-building hubs to enhance technical skills and awareness among MSMEs.

Speaking during the launch, the Managing Director and Chief Executive Officer of the Bank of Industry, Dr. Olasupo Olusi, emphasized the vital role MSMEs play in the Nigerian economy. He noted that small businesses account for more than 80 percent of enterprises in the country, contribute nearly half of the national GDP, and employ millions of people.

Olusi stated that despite their impact, many MSMEs struggle to grasp how ESG principles apply in daily operations, which makes them less competitive and less prepared for the future. He explained that BOI’s new ESG initiative seeks to address this by helping businesses operate sustainably, attract funding, and grow profitably in line with global trends.

He further explained that Nigeria’s ESG adoption efforts align with the country’s obligations under the Paris Agreement, Nationally Determined Contributions, and Energy Transition Plan—particularly its target of achieving a 47 percent conditional emission reduction by 2030.

Olusi added that embracing ESG practices will make it easier for businesses to access international funding as more global investors and financial institutions now prioritize sustainability-driven ventures. He noted that ESG integration also helps companies reduce risks, cut costs, attract skilled workers, and meet international business standards.

He said, “ESG principles will help us align our industrial goals with both national and global climate commitments. It will also open doors to green capital, promote innovation, and position Nigerian industries for global competitiveness.”

The BOI chief stressed that sustainable business practices such as clean energy use, resource efficiency, workplace safety, and strong governance systems are fundamental to long-term industrialization and economic development.

Delivering her keynote address, the Director-General of the National Council on Climate Change, Tenioye Majekodunmi, highlighted how climate realities and shifting investor expectations are transforming global markets. She noted that the move toward a low-carbon economy will reshape how businesses compete, attract investment, and manage risks.

Majekodunmi explained that global investors are now channeling trillions of dollars into sustainable projects, while consumers increasingly demand ethical sourcing and transparency. She added that this transition presents both risks and opportunities for Nigerian enterprises, emphasizing that MSMEs that embed ESG principles early will be more attractive to international partners and financiers.

She commended the Bank of Industry for creating an ESG framework that can serve as a model for directing finance toward inclusive and responsible growth. According to her, by aligning its lending and investment policies with global sustainability standards, BOI is helping Nigerian businesses position themselves to access green finance locally and internationally.

Also speaking at the event, the Deputy Country Director of Agence Française de Développement (AFD) in Nigeria, Mahamadou Diarra, praised BOI for taking proactive steps in promoting responsible financing and environmental stewardship. He stated that BOI’s initiatives will strengthen its reputation among global financial partners, including institutions such as the World Bank and the Asian Development Bank, which are aligning their frameworks toward ESG-based financing.

Diarra reaffirmed AFD’s support for BOI’s efforts to strengthen its ESG management systems and promote climate-related investments across Nigeria. He emphasized that AFD places strong importance on ensuring that its partner institutions uphold the same level of environmental and social diligence required in its operations.

The Bank of Industry remains Nigeria’s foremost development finance institution, with a mandate to accelerate industrial growth and private-sector development. Through long-term financing, business advisory, and strategic interventions, BOI continues to support enterprises of all sizes in establishing, expanding, and modernizing their operations.